Ralph V. Whitworth
Chairman of the Board
Margaret C. Whitman
President and Chief Executive Officer
30JAN201219515623
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
www.hp.com
To our Stockholders:
We are pleased to invite you to attend the annual meeting of stockholders of Hewlett-Packard
Company to be held on Wednesday, March 19, 2014 at 2:00 p.m., local time, at the Santa Clara
Convention Center, 5001 Great America Parkway, Santa Clara, California.
Details regarding admission to the meeting and the business to be conducted are more fully described
in the accompanying Notice of Annual Meeting and Proxy Statement.
This year, we are pleased to again be using the U.S. Securities and Exchange Commission rule that
allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to many
of our stockholders a notice instead of a paper copy of this proxy statement and our 2013 Annual
Report. The notice contains instructions on how to access those documents over the Internet. The
notice also contains instructions on how each of those stockholders can receive a paper copy of our
proxy materials, including this proxy statement, our 2013 Annual Report, and a form of proxy card or
voting instruction card. All stockholders who do not receive a notice, including stockholders who have
previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy
materials by mail unless they have previously requested delivery of proxy materials electronically.
Continuing to employ this distribution process will conserve natural resources and reduce the costs of
printing and distributing our proxy materials.
Your vote is important. Regardless of whether you plan to attend the annual meeting, we hope you will
vote as soon as possible. You may vote by proxy over the Internet or by telephone, or, if you received
paper copies of the proxy materials by mail, you may also vote by mail by following the instructions on
the proxy card or voting instruction card. Voting over the Internet or by telephone, written proxy or
voting instruction card will ensure your representation at the annual meeting regardless of whether you
attend in person.
Thank you for your ongoing support of, and continued interest in, Hewlett-Packard Company.
Sincerely,
30JAN201422103533
30JAN201403245786
Ralph V. Whitworth
Chairman of the Board
Margaret C. Whitman
President and Chief Executive Officer
2014 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROXY STATEMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
QUESTIONS AND ANSWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proxy Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual Meeting Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Proposals, Director Nominations and Related Bylaw Provisions . . . . . . . . . . . . . . .
Further Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Governance Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Structure and Committee Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Sessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Policy Regarding Voting for Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications with the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES . . . . . . . . . . . . . . . .
PROPOSALS TO BE VOTED ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 1 Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 2 Ratification of Independent Registered Public Accounting Firm . . . . . . . . .
PROPOSAL NO. 3 Advisory Vote to Approve Executive Compensation . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 4 Stockholder Proposal Related to the Formation of a Human Rights
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE . . . . . . . . . . . . . . . .
RELATED PERSON TRANSACTION POLICIES AND PROCEDURES . . . . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HR and Compensation Committee Report on Executive Compensation . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants of Plan-Based Awards in Fiscal 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding Equity Awards at 2013 Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option Exercises and Stock Vested in Fiscal 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2013 Pension Benefits Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2013 Nonqualified Deferred Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Payments Upon Termination or Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . .
EQUITY COMPENSATION PLAN INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1
2
6
6
8
13
14
16
17
17
18
19
23
24
26
26
28
28
29
34
34
41
42
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
43
47
50
50
52
52
78
79
82
84
87
88
90
92
96
97
98
99
HEWLETT-PACKARD COMPANY
3000 Hanover Street
Palo Alto, California 94304
(650) 857-1501
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Time and Date
Place
Items of Business
2:00 p.m., local time, on Wednesday, March 19, 2014
Santa Clara Convention Center, 5001 Great America Parkway, Santa Clara, California
(1) To elect the 12 directors named in this proxy statement
(2) To ratify the appointment of the independent registered public accounting firm for the
fiscal year ending October 31, 2014
(3) To conduct an advisory vote on executive compensation
(4) To consider and vote upon one stockholder proposal, if properly presented
(5) To consider such other business as may properly come before the meeting
Adjournments and Any action on the items of business described above may be considered at the annual meeting at
Postponements
the time and on the date specified above or at any time and date to which the annual meeting
may be properly adjourned or postponed.
Record Date
You are entitled to vote only if you were a Hewlett-Packard Company stockholder as of the
close of business on January 21, 2014.
Meeting Admission You are entitled to attend the annual meeting only if you were a Hewlett-Packard Company
stockholder as of the close of business on January 21, 2014 or hold a valid proxy for the annual
meeting. You should be prepared to present photo identification for admittance. In addition, if you
are a stockholder of record or hold your shares through the Hewlett-Packard Company 401(k)
Plan or the Hewlett-Packard Company 2011 Employee Stock Purchase Plan, your ownership as of
the record date will be verified prior to admittance into the meeting. If you are not a stockholder
of record but hold shares through a broker, trustee or nominee, you must provide proof of
beneficial ownership as of the record date, such as your most recent account statement prior to
January 21, 2014 or similar evidence of ownership. If you do not provide photo identification and
comply with the other procedures outlined above, you will not be admitted to the annual meeting.
The annual meeting will begin promptly at 2:00 p.m., local time. Check-in will begin at 12:30 p.m.,
local time, and you should allow ample time for the check-in procedures.
Voting
Your vote is very important. Regardless of whether you plan to attend the annual meeting, we
hope you will vote as soon as possible. You may vote your shares over the Internet or via a
toll-free telephone number. If you received a paper copy of a proxy or voting instruction card by
mail, you may submit your proxy or voting instruction card for the annual meeting by completing,
signing, dating and returning your proxy or voting instruction card in the pre-addressed envelope
provided. For specific instructions on how to vote your shares, please refer to the section entitled
Questions and Answers—Voting Information beginning on page 8 of the proxy statement.
By order of the Board of Directors,
9JAN201321561766
JOHN F. SCHULTZ
Executive Vice President, General Counsel
and Secretary
This notice of annual meeting and proxy statement and form of proxy are being distributed and made available on or
about February 3, 2014.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held
on March 19, 2014. The proxy statement and Hewlett-Packard Company’s 2013 Annual Report are available
electronically at www.hp.com/investor/stockholdermeeting2014.
PROXY STATEMENT SUMMARY
The following is a summary of certain key disclosures in our proxy statement. This is only a summary, and
it may not contain all of the information that is important to you. For more complete information, please
review the proxy statement as well as our 2013 Annual Report, which includes our Annual Report on
Form 10-K. References to ‘‘Hewlett-Packard,’’ ‘‘HP,’’ ‘‘we,’’ ‘‘us’’ or ‘‘our’’ refer to Hewlett-Packard
Company.
Annual Meeting of Stockholders
Time and Date
Place
Record Date
2:00 p.m., local time, on Wednesday, March 19, 2014
Santa Clara Convention Center, 5001 Great America Parkway, Santa Clara, California
January 21, 2014
Proposals to be Voted on and Board Voting Recommendations
Proposals
Recommendation
Election of directors
FOR EACH NOMINEE
Ratification of the appointment of Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending October 31,
2014
FOR
Advisory vote to approve executive compensation
FOR
Stockholder proposal related to the formation of a Human Rights
Committee
AGAINST
2
Proposal No. 1—Director Nominees
The following table provides summary information about each of the director nominees:
*
Name
HP
Director
Age Since
Marc L. Andreessen
42
2009
Co-Founder, AH Capital Management, LLC,
doing business as Andreessen Horowitz
Yes
Shumeet Banerji
54
2011
Former Senior Partner, Booz & Company
Yes
Robert R. Bennett
55
2013
Managing Director, Hilltop Investments, LLC;
former President, Discovery Holding Company
Yes
Demand Media, Inc.*;
Discovery
Communications, Inc.;
Liberty Media
Corporation; Sprint
Corporation
Rajiv L. Gupta
68
2009
Chairman, Avantor Performance Materials, and
Senior Advisor, New Mountain Capital, LLC;
former Chairman and Chief Executive Officer,
Rohm and Haas Company
Yes
Delphi Automotive, PLC;
Tyco International Ltd.;
The Vanguard Group
Raymond J. Lane
67
2010
Partner Emeritus, Kleiner Perkins Caufield &
Byers
No
Ann M. Livermore
55
2011
Former Executive Vice President, Enterprise
Business, Hewlett-Packard Company
No
Raymond E. Ozzie
58
2013
Chief Executive Officer, Talko, Inc.; former
Chief Software Architect, Microsoft Corporation
Yes
Gary M. Reiner
59
2011
Operating Partner, General Atlantic; former
Senior Vice President and Chief Information
Officer, General Electric Company
Yes
Citigroup Inc.
Patricia F. Russo
61
2011
Former Chief Executive Officer, Alcatel-Lucent
Yes
Alcoa, Inc.; General
Motors Company;
Merck & Co., Inc.; KKR
Management LLC
James A. Skinner
69
2013
Non-Executive Chairman, Walgreen Co.; former
Vice Chairman and Chief Executive Officer,
McDonald’s Corporation
Yes
Illinois Tool Works Inc.
Margaret C. Whitman 57
2011
President and Chief Executive Officer,
Hewlett-Packard Company
No
The Procter & Gamble
Company
Ralph V. Whitworth
2011
Principal, Relational Investors LLC
Yes
58
Noteworthy Experience
Independent
Other Public/Investment
Company Boards/
Current Affiliations
eBay Inc.; Facebook, Inc.
United Parcel Service, Inc.
In January 2014, Mr. Bennett resigned from the board of directors of Demand Media, Inc. effective February 28, 2014.
Proposal No. 2—Ratification of Independent Registered Public Accounting Firm
We are asking our stockholders to ratify the selection of Ernst & Young LLP (‘‘EY’’) as our
independent registered public accounting firm for fiscal 2014. Set forth below is a summary of EY’s
fees for services provided in fiscal 2013 and 2012:
2013
2012
In millions
Audit Fees . . . . . .
Audit-Related Fees
Tax Fees . . . . . . . .
All Other Fees . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$34.9
13.8
5.0
0.8
$30.6
14.8
3.2
2.2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$54.5
$50.8
3
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Proposal No. 3—Advisory Vote on Executive Compensation
Our Board of Directors (the ‘‘Board’’) and HR and Compensation Committee of the Board
are committed to excellence in corporate governance and to executive compensation programs that
align the interests of our executives with those of our stockholders. To fulfill this mission, we have a
pay-for-performance philosophy that forms the foundation for all decisions regarding compensation.
Our compensation programs have been structured to balance near-term results with long-term success,
enable us to attract, retain, focus, and reward our executive team for delivering stockholder value. The
table below summarizes key elements of our fiscal 2013 compensation programs relative to this
philosophy.
ALIGNMENT WITH STOCKHOLDERS
Pay-for-Performance
Corporate Governance
• The majority of target total direct compensation for
executives is performance-based as well as equity-based
• We generally do not enter into individual executive
compensation agreements
• Total direct compensation is targeted at the median
of our market
• We devote significant time to management succession
planning and leadership development efforts
• Actual total direct compensation and pay positioning
is designed to fluctuate with and be commensurate
with actual performance
• We maintain a market-aligned severance policy for
executives that does not have automatic single-trigger
equity vesting upon a change in control
• Incentive awards are heavily dependent upon our
performance against objective financial metrics which
we believe link either directly or indirectly to the
creation of value for our stockholders. In addition,
25% of our target annual bonus is contingent upon
the achievement of qualitative objectives that we
believe will contribute to our long-term success
• The HR and Compensation Committee utilizes an
independent compensation consultant
• We balance growth and return objectives, top and
bottom line objectives, and short- and long-term
objectives to reward for overall performance that
does not over-emphasize a singular focus
• Our compensation programs do not encourage
imprudent risk-taking
• A significant portion of our long-term incentives are
delivered in the form of performance-contingent stock
options which vest only if sustained stock price
appreciation is achieved
• We disclose our performance goals and achievements
relative to these goals
• We provide no special or supplemental pension
benefits
• We conduct a robust stockholder outreach program
throughout the year
• We validate our pay-for-performance relationship on
an annual basis
The Compensation Discussion and Analysis portion of this proxy statement contains a detailed
description of our executive compensation philosophy and programs, the compensation decisions the
HR and Compensation Committee has made under those programs and the factors considered in
making those decisions, focusing on the compensation of our named executive officers (‘‘NEOs’’) for
fiscal 2013, who were:
• Margaret C. Whitman, President and Chief Executive Officer (‘‘CEO’’);
• Catherine A. Lesjak, Executive Vice President and Chief Financial Officer;
4
• William L. Veghte, Executive Vice President and General Manager, Enterprise Group;
• Dion J. Weisler, Executive Vice President, Printing and Personal Systems Group;
• Michael G. Nefkens, Executive Vice President, Enterprise Services; and
• R. Todd Bradley, former Executive Vice President, Printing and Personal Systems Group.
We believe that we have created a compensation program deserving of stockholder support.
Accordingly, we are asking for stockholder approval of the compensation of our NEOs as disclosed in
this proxy statement.
Proposal No. 4—Stockholder Proposal Related to the Formation of a Human Rights Committee
The Board recommends a vote AGAINST a stockholder proposal seeking to have us establish
a Human Rights Committee of the Board. We believe the Nominating, Governance and Social
Responsibility Committee of the Board already appropriately and effectively oversees our policies and
efforts relating to human rights, so the establishment of an additional committee to oversee the same
policies and practices is unnecessary and would not be in the best interests of our stockholders.
5
QUESTIONS AND ANSWERS
Proxy Materials
1.
Why am I receiving these materials?
We have made these materials available to you over the Internet or delivered paper copies of
these materials to you by mail in connection with our annual meeting of stockholders, which will take
place on Wednesday, March 19, 2014. As a stockholder, you are invited to attend the annual meeting
and to vote on the items of business described in this proxy statement. This proxy statement includes
information that we are required to provide to you under the rules of the U.S. Securities and Exchange
Commission (the ‘‘SEC’’) and that is designed to assist you in voting your shares. See Questions 15 and
16 below for information regarding how you can vote your shares in person at the annual meeting or
by proxy (without attending the annual meeting).
2.
What is included in the proxy materials?
The proxy materials include:
• Our proxy statement for the annual meeting of stockholders; and
• Our 2013 Annual Report, which includes our Annual Report on Form 10-K for the fiscal
year ended October 31, 2013.
If you received a paper copy of these materials by mail, the proxy materials also include a proxy card
or a voting instruction card for the annual meeting. If you received a notice of the Internet availability
of the proxy materials instead of a paper copy of the proxy materials, see Questions 15 and 16 below
for information regarding how you can vote your shares.
3.
What information is contained in this proxy statement?
The information in this proxy statement relates to the proposals to be voted on at the annual
meeting, the voting process, the Board and Board committees, the compensation of our directors and
certain executive officers for fiscal 2013 and other required information.
4.
Why did I receive a notice in the mail regarding the Internet availability of the proxy
materials instead of a paper copy of the full set of proxy materials?
This year, we are pleased to be again using the SEC rule that allows companies to furnish their
proxy materials over the Internet. As a result, we are mailing to many of our stockholders a notice of
the Internet availability of the proxy materials instead of a paper copy of the proxy materials. All
stockholders receiving the notice will have the ability to access the proxy materials over the Internet
and request to receive a paper copy of the proxy materials by mail. Instructions on how to access the
proxy materials over the Internet or to request a paper copy may be found in the notice of the Internet
availability of the proxy materials. In addition, the notice contains instructions on how you may request
to access proxy materials in printed form by mail or electronically on an ongoing basis.
5.
Why didn’t I receive a notice in the mail about the Internet availability of the proxy materials?
We are providing some of our stockholders, including stockholders who have previously
requested to receive paper copies of the proxy materials and some of our stockholders who are living
outside of the United States, with paper copies of the proxy materials instead of a notice of the
Internet availability of the proxy materials.
6
In addition, we are providing notice of the Internet availability of the proxy materials by e-mail
to those stockholders who have previously elected delivery of the proxy materials electronically. Those
stockholders should have received an e-mail containing a link to the website where those materials are
available and a link to the proxy voting website.
6.
How can I access the proxy materials over the Internet?
Your notice of the Internet availability of the proxy materials, proxy card or voting instruction
card will contain instructions on how to:
• View our proxy materials for the annual meeting on the Internet; and
• Instruct us to send our future proxy materials to you electronically by e-mail.
Our proxy materials are also available on our website at www.hp.com/investor/stockholdermeeting2014.
Your notice of the Internet availability of the proxy materials, proxy card or voting instruction
card will contain instructions on how you may request to access proxy materials electronically on an
ongoing basis. Choosing to access your future proxy materials electronically will help us conserve
natural resources and reduce the costs of distributing our proxy materials. If you choose to access
future proxy materials electronically, you will receive an e-mail with instructions containing a link to the
website where those materials are available and a link to the proxy voting website. Your election to
access proxy materials by e-mail will remain in effect until you terminate it.
7.
How may I obtain a paper copy of the proxy materials?
Stockholders receiving a notice of the Internet availability of the proxy materials will find
instructions about how to obtain a paper copy of the proxy materials on their notice. Stockholders
receiving notice of the Internet availability of the proxy materials by e-mail will find instructions about
how to obtain a paper copy of the proxy materials as part of that e-mail. All stockholders who do not
receive a notice or an e-mail will receive a paper copy of the proxy materials by mail.
8.
I share an address with another stockholder, and we received only one paper copy of the proxy
materials or notice of the Internet availability of the proxy materials. How may I obtain an
additional copy?
If you share an address with another stockholder, you may receive only one paper copy of the
proxy materials or notice of the Internet availability of the proxy materials, as applicable, unless you
have provided contrary instructions. If you wish to receive a separate set of the proxy materials or
notice of the Internet availability of the proxy materials now, please request the additional copy by
contacting Innisfree M&A Incorporated (‘‘Innisfree’’) at:
(877) 750-5838 (U.S. and Canada)
(412) 232-3651 (International)
E-mail: info@innisfreema.com
A separate set of proxy materials or notice of the Internet availability of the proxy materials, as
applicable, will be sent promptly following receipt of your request.
If you are a stockholder of record and wish to receive a separate set of proxy materials or
notice of the Internet availability of the proxy materials, as applicable, in the future, please contact our
transfer agent. See Question 23 below.
7
If you are the beneficial owner of shares held through a broker, trustee or other nominee and
you wish to receive a separate set of proxy materials or notice of the Internet availability of the proxy
materials, as applicable, in the future, please call Broadridge Financial Solutions, Inc. at:
(800) 542-1061
All stockholders also may write to HP at the address below to request a separate set of proxy
materials or notice of the Internet availability of the proxy materials, as applicable:
NASDAQ OMX
Print and Distribution Ctr.
325 Donald Lynch Blvd
Marlborough, MA 01752
9.
What should I do if I receive more than one notice or e-mail about the Internet availability of
the proxy materials or more than one paper copy of the proxy materials?
You may receive more than one notice, more than one e-mail or more than one paper copy of
the proxy materials, including multiple paper copies of this proxy statement and multiple proxy cards or
voting instruction cards. For example, if you hold your shares in more than one brokerage account, you
may receive a separate notice, a separate e-mail or a separate voting instruction card for each
brokerage account in which you hold shares. If you are a stockholder of record and your shares are
registered in more than one name, you may receive more than one notice, more than one e-mail or
more than one proxy card. To vote all of your shares by proxy, you must complete, sign, date and
return each proxy card and voting instruction card that you receive and vote over the Internet the
shares represented by each notice and e-mail that you receive (unless you have requested and received
a proxy card or voting instruction card for the shares represented by one or more of those notices or
e-mails).
10.
How may I obtain a copy of HP’s 2013 Form 10-K and other financial information?
Stockholders may request a free copy of our 2013 Annual Report, which includes our 2013
Form 10-K, from:
NASDAQ OMX
Print and Distribution Ctr.
325 Donald Lynch Blvd
Marlborough, MA 01752
www.hp.com/investor/informationrequest
Alternatively, stockholders can access the 2013 Annual Report on HP’s Investor Relations website at:
www.hp.com/investor/home
We also will furnish any exhibit to the 2013 Form 10-K if specifically requested.
Voting Information
11.
What proposals will be voted on at the annual meeting?
Stockholders will vote on four proposals at the annual meeting:
• The election to the Board of 12 director nominees;
8
• The ratification of the appointment of our independent registered public accounting firm for
the 2014 fiscal year;
• The advisory vote to approve executive compensation; and
• The consideration of one stockholder proposal, if properly presented.
We also will consider any other business that properly comes before the annual meeting. See
Question 27 below.
12.
How does the Board recommend that I vote?
Our Board recommends that you vote your shares FOR each of the nominees for election to
the Board, FOR the ratification of the appointment of our independent registered public accounting
firm, FOR the advisory approval of the compensation of our named executive officers, and AGAINST
the stockholder proposal.
13.
What is the difference between holding shares as a stockholder of record and as a beneficial
owner?
Most of our stockholders hold their shares through a broker, trustee or other nominee rather
than directly in their own name. As summarized below, there are some distinctions between shares held
of record and those owned beneficially.
• Stockholder of Record—If your shares are registered directly in your name with our transfer
agent, you are considered, with respect to those shares, the ‘‘stockholder of record.’’ As the
stockholder of record, you have the right to grant your voting proxy directly to HP or to a
third party, or to vote in person at the meeting.
• Beneficial Owner—If your shares are held in a brokerage account, by a trustee or by another
nominee (that is, in ‘‘street name’’), you are considered the ‘‘beneficial owner’’ of those
shares. As the beneficial owner of those shares, you have the right to direct your broker,
trustee or nominee how to vote and you also are invited to attend the annual meeting.
However, because a beneficial owner is not the stockholder of record, you will not be
entitled to vote your beneficially-owned shares in person at the meeting unless you obtain a
‘‘legal proxy’’ from the broker, trustee or nominee that holds your shares, giving you the
right to vote the shares at the meeting.
14.
Who is entitled to vote and how many shares can I vote?
Each holder of shares of HP common stock issued and outstanding as of the close of business
on January 21, 2014, the record date for the annual meeting, is entitled to cast one vote per share on
all items being voted upon at the annual meeting. You may vote all shares owned by you as of this
time, including (1) shares held directly in your name as the stockholder of record, including shares
purchased through our Dividend Reinvestment Plan and employee stock purchase plans, and shares
held through our Direct Registration Service; and (2) shares held for you as the beneficial owner
through a broker, trustee or other nominee.
On the record date, HP had approximately 1,902,452,591 shares of common stock issued and
outstanding.
9
15.
How can I vote my shares in person at the annual meeting?
Shares held in your name as the stockholder of record may be voted in person at the annual
meeting. Shares for which you are the beneficial owner but not the stockholder of record may be voted
in person at the annual meeting only if you obtain a legal proxy from the broker, trustee or nominee
that holds your shares giving you the right to vote the shares. Even if you plan to attend the annual
meeting, we recommend that you also vote by proxy as described below so that your vote will be
counted if you later decide not to attend the meeting.
16.
How can I vote my shares without attending the annual meeting?
Whether you hold shares directly as the stockholder of record or through a broker, trustee or
other nominee as the beneficial owner, you may direct how your shares are voted without attending the
annual meeting. There are three ways to vote by proxy:
• By Internet—Stockholders who have received a notice of the Internet availability of the
proxy materials by mail may submit proxies over the Internet by following the instructions on
the notice. Stockholders who have received notice of the Internet availability of the proxy
materials by e-mail may submit proxies over the Internet by following the instructions
included in the e-mail. Stockholders who have received a paper copy of a proxy card or
voting instruction card by mail may submit proxies over the Internet by following the
instructions on the proxy card or voting instruction card.
• By Telephone—Stockholders of record who live in the United States or Canada may submit
proxies by telephone by calling 1-866-209-1711 and following the instructions. Stockholders of
record who have received a notice of the Internet availability of the proxy materials by mail
must have the control number that appears on their notice available when voting.
Stockholders of record who received notice of the Internet availability of the proxy materials
by e-mail must have the control number included in the e-mail available when voting.
Stockholders of record who have received a proxy card by mail must have the control
number that appears on their proxy card available when voting. Most stockholders who are
beneficial owners of their shares living in the United States or Canada and who have
received a voting instruction card by mail may vote by phone by calling the number specified
on the voting instruction card provided by their broker, trustee or nominee. Those
stockholders should check the voting instruction card for telephone voting availability.
• By Mail—Stockholders who have received a paper copy of a proxy card or voting instruction
card by mail may submit proxies by completing, signing and dating their proxy card or voting
instruction card and mailing it in the accompanying pre-addressed envelope.
17.
What is the deadline for voting my shares?
If you hold shares as the stockholder of record, or through the Hewlett-Packard Company 2011
Employee Stock Purchase Plan (the ‘‘ESPP’’), your vote by proxy must be received before the polls
close at the annual meeting.
If you hold shares in the Hewlett-Packard Company 401(k) Plan (the ‘‘HP 401(k) Plan’’), your
voting instructions must be received by 11:59 p.m., Eastern time, on March 16, 2014 for the trustee to
vote your shares.
If you are the beneficial owner of shares held through a broker, trustee or other nominee,
please follow the voting instructions provided by your broker, trustee or nominee.
10
18.
May I change my vote or revoke my proxy?
You may change your vote or revoke your proxy at any time prior to the vote at the annual
meeting, except that any change to your voting instructions for shares held in the HP 401(k) Plan must
be provided by 11:59 p.m., Eastern time, on March 16, 2014 as described above.
If you are the stockholder of record, you may change your vote by: (1) granting a new proxy
bearing a later date (which automatically revokes the earlier proxy); (2) providing a written notice of
revocation to the Corporate Secretary at the address below in Question 31 prior to your shares being
voted; or (3) attending the annual meeting and voting in person. Attendance at the meeting will not
cause your previously granted proxy to be revoked unless you specifically make that request. For shares
you hold beneficially in the name of a broker, trustee or other nominee, you may change your vote by
submitting new voting instructions to your broker, trustee or nominee, or, if you have obtained a legal
proxy from your broker or nominee giving you the right to vote your shares, by attending the meeting
and voting in person.
19.
Is my vote confidential?
Proxy instructions, ballots and voting tabulations that identify individual stockholders are
handled in a manner that protects your voting privacy. Your vote will not be disclosed, either within HP
or to third parties, except: (1) as necessary to meet applicable legal requirements; (2) to allow for the
tabulation of votes and certification of the vote; and (3) to facilitate a successful proxy solicitation.
Occasionally, stockholders provide on their proxy card written comments, which are then forwarded to
management.
20.
How are votes counted, and what affect do abstentions and broker non-votes have on the
proposals?
In the election of directors, you may vote ‘‘FOR,’’ ‘‘AGAINST’’ or ‘‘ABSTAIN’’ with respect to
each of the nominees. If you elect to abstain in the election of directors, the abstention will not impact
the election of directors. In tabulating the voting results for the election of directors, only ‘‘FOR’’ and
‘‘AGAINST’’ votes are counted. You also may cumulate your votes as described in Question 22 below.
For the other items of business, you may vote ‘‘FOR,’’ ‘‘AGAINST’’ or ‘‘ABSTAIN.’’ For these
other items of business, if you elect to abstain, the abstention will have the same effect as an
‘‘AGAINST’’ vote.
If you are the beneficial owner of shares held in the name of a broker, trustee or other
nominee and do not provide that broker, trustee or other nominee with voting instructions, your shares
may constitute ‘‘broker non-votes.’’ Generally, broker non-votes occur on a matter when a broker is not
permitted to vote on that matter without instructions from the beneficial owner and instructions are not
given. Under the rules of the New York Stock Exchange, brokers, trustees or other nominees may
generally vote on routine matters but cannot vote on non-routine matters. Only Proposal No. 2
(ratifying the appointment of the independent registered public accounting firm) is considered a routine
matter. The other proposals are not considered routine matters, and without your instructions, your
broker cannot vote your shares. In tabulating the voting results for any particular proposal, shares that
constitute broker non-votes are not considered entitled to vote on that proposal. Thus, broker
non-votes will not affect the outcome of any matter being voted on at the meeting.
If you provide specific instructions with regard to certain items, your shares will be voted as
you instruct on such items. If you vote by proxy card or voting instruction card and sign the card
without giving specific instructions, your shares will be voted in accordance with the recommendations
of the Board (FOR all of our nominees to the Board, FOR ratification of the appointment of our
11
independent registered public accounting firm, FOR the approval of the compensation of our named
executive officers, and AGAINST the stockholder proposal).
For any shares you hold in the HP 401(k) Plan, if your voting instructions are not received by
11:59 p.m., Eastern time, on March 16, 2014, your shares will be voted in proportion to the way the
shares held by the other HP 401(k) Plan participants are voted, except as may be otherwise required by
law.
21.
What is the voting requirement to approve each of the proposals?
In the election of directors, each director will be elected by the vote of the majority of votes
cast with respect to that director nominee. A majority of votes cast means that the number of votes
cast for a nominee’s election must exceed the number of votes cast against such nominee’s election.
Each nominee receiving more votes ‘‘for’’ his or her election than votes ‘‘against’’ his or her election
will be elected. Approval of each of the other proposals requires the affirmative vote of a majority of
the shares present, in person or represented by proxy, and entitled to vote on that proposal at the
annual meeting.
22.
Is cumulative voting permitted for the election of directors?
In the election of directors, you may choose to cumulate your vote. Cumulative voting applies
only to the election of directors and allows you to allocate among the director nominees, as you see fit,
the total number of votes equal to the number of director positions to be filled multiplied by the
number of shares you hold. For example, if you own 100 shares of stock and there are 12 directors to
be elected at the annual meeting, you may allocate 1,200 ‘‘FOR’’ votes (12 times 100) among as few or
as many of the 12 nominees to be voted on at the annual meeting as you choose. You may not
cumulate your votes against a nominee.
If you are a stockholder of record and choose to cumulate your votes, you will need to submit
a proxy card or, if you vote in person at the annual meeting, you will need to submit a ballot and make
an explicit statement of your intent to cumulate your votes, either by so indicating in writing on the
proxy card or by indicating in writing on your ballot when voting at the annual meeting. If you hold
shares beneficially through a broker, trustee or other nominee and wish to cumulate votes, you should
contact your broker, trustee or nominee.
If you vote by proxy card or voting instruction card and sign your card with no further
instructions, Margaret C. Whitman, Catherine A. Lesjak and John F. Schultz, as proxy holders, may
cumulate and cast your votes in favor of the election of some or all of the applicable nominees in their
sole discretion, except that none of your votes will be cast for any nominee as to whom you vote
against or abstain from voting.
23.
What if I have questions for our transfer agent?
Please contact our transfer agent, at the phone number or address listed below, with questions
concerning stock certificates, dividend checks, transfer of ownership or other matters pertaining to your
stock account.
Wells Fargo Bank, N.A.
Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
(800) 286-5977 (U.S. and Canada)
(651) 453-2122 (International)
12
A dividend reinvestment and stock purchase program is also available through our transfer
agent. For information about this program, please contact our transfer agent as follows:
Wells Fargo Bank, N.A.
Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
(800) 286-5977 (U.S. and Canada)
(651) 453-2122 (International)
Annual Meeting Information
24.
How can I attend the annual meeting?
You are entitled to attend the annual meeting only if you were an HP stockholder or joint
holder as of the close of business on January 21, 2014 or if you hold a valid proxy for the annual
meeting. You must present photo identification for admittance. If you are a stockholder of record or
hold your shares through the HP 401(k) Plan or the ESPP, your name will be verified against the list of
stockholders of record or plan participants on the record date prior to your admission to the annual
meeting. If you are not a stockholder of record but hold shares through a broker, trustee or nominee,
you must provide proof of beneficial ownership on the record date, such as your most recent account
statement prior to January 21, 2014 or other similar evidence of ownership.
If you do not provide photo identification or comply with the other procedures outlined above,
you will not be admitted to the annual meeting.
The meeting will begin promptly at 2:00 p.m., local time. Check-in will begin at 12:30 p.m.,
local time, and you should allow ample time for the check-in procedures.
25.
How many shares must be present or represented to conduct business at the annual meeting?
The quorum requirement for holding the annual meeting and transacting business is that
holders of a majority of shares of HP common stock entitled to vote must be present in person or
represented by proxy. Both abstentions and broker non-votes described previously in Question 20 are
counted for the purpose of determining the presence of a quorum.
26.
What if a quorum is not present at the annual meeting?
If a quorum is not present at the scheduled time of the annual meeting, then either the
chairman of the Annual Meeting or the stockholders by vote the holders of a majority of the stock
present in person or represented by proxy at the annual meeting are authorized by our Bylaws to
adjourn the annual meeting until a quorum is present or represented.
27.
What happens if additional matters are presented at the annual meeting?
Other than the four items of business described in this proxy statement, we are not aware of
any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as
proxy holders, Margaret C. Whitman, Catherine A. Lesjak and John F. Schultz, will have the discretion
to vote your shares on any additional matters properly presented for a vote at the meeting. If for any
reason any of the nominees named in this proxy statement is not available as a candidate for director,
the persons named as proxy holders will vote your proxy for such other candidate or candidates as may
be nominated by the Board.
13
28.
Who will serve as inspector of elections?
The inspector of elections will be a representative from an independent firm, IVS
Associates, Inc.
29.
Where can I find the voting results of the annual meeting?
We intend to announce preliminary voting results at the annual meeting and publish final
results in a Current Report on Form 8-K to be filed with the SEC within four business days of the
annual meeting.
30.
Who will bear the cost of soliciting votes for the annual meeting?
HP is making this solicitation and will pay the entire cost of preparing, assembling, printing,
mailing and distributing the notices and these proxy materials and soliciting votes. In addition to the
mailing of the notices and these proxy materials, the solicitation of proxies or votes may be made in
person, by telephone or by electronic communication by our directors, officers and employees, who will
not receive any additional compensation for such solicitation activities. We also have hired Innisfree to
assist us in the distribution of proxy materials and the solicitation of votes described above. We will pay
Innisfree a base fee of $20,000 plus customary costs and expenses for these services. We have agreed to
indemnify Innisfree against certain liabilities arising out of or in connection with these services. We also
will reimburse brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy
and solicitation materials to stockholders.
Stockholder Proposals, Director Nominations and Related Bylaw Provisions
31.
What is the deadline to propose actions (other than director nominations) for consideration at
next year’s annual meeting of stockholders?
You may submit proposals for consideration at future stockholder meetings. For a stockholder
proposal to be considered for inclusion in our proxy statement for the annual meeting next year, the
Corporate Secretary must receive the written proposal at our principal executive offices no later than
October 6, 2014. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding
the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be
addressed to:
Corporate Secretary
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, California 94304
Fax: (650) 857-4837
For a stockholder proposal that is not intended to be included in our proxy statement for next
year’s annual meeting under Rule 14a-8, the stockholder must provide the information required by our
Bylaws and give timely notice to the Corporate Secretary in accordance with our Bylaws, which, in
general, require that the notice be received by the Corporate Secretary:
• Not earlier than the close of business on November 19, 2014; and
• Not later than the close of business on December 19, 2014.
If the date of the stockholder meeting is moved more than 30 days before or 60 days after the
anniversary of our annual meeting for the prior year, then notice of a stockholder proposal that is not
14
intended to be included in our proxy statement under Rule 14a-8 must be received no earlier than the
close of business 120 days prior to the meeting and not later than the close of business on the later of
the following two dates:
• 90 days prior to the meeting; and
• 10 days after public announcement of the meeting date.
Deadlines for the nomination of director candidates are discussed in Question 33 below.
32.
How may I recommend individuals to serve as directors and what is the deadline for a
director recommendation?
You may recommend director candidates for consideration by the Nominating, Governance and
Social Responsibility Committee. Any such recommendations should include verification of the
stockholder status of the person submitting the recommendation and the nominee’s name and
qualifications for Board membership and should be directed to the Corporate Secretary at the address
of our principal executive offices set forth in Question 31 above. See ‘‘Proposal No. 1—Election of
Directors—Director Nominee Experience and Qualifications’’ for more information regarding our
Board membership criteria.
A stockholder may send a recommended director candidate’s name and information to the
Board at any time. Generally, such proposed candidates are considered at the first or second Board
meeting prior to the issuance of the proxy statement for our annual meeting.
33.
How may I nominate individuals to serve as directors and what are the deadlines for a
director nomination?
Our Bylaws permit stockholders to nominate directors for consideration at an annual meeting.
To nominate a director for consideration at an annual meeting, a nominating stockholder must provide
the information required by our Bylaws and give timely notice of the nomination to the Corporate
Secretary in accordance with our Bylaws, and each nominee must meet the qualifications required by
our Bylaws. To nominate a director for consideration at next year’s annual meeting, in general the
notice must be received by the Corporate Secretary between the close of business on November 19,
2014 and the close of business on December 19, 2014, unless the annual meeting is moved by more
than 30 days before or 60 days after the anniversary of the prior year’s annual meeting, in which case
the deadline will be as described in Question 31 above.
In addition, our Bylaws provide that under certain circumstances, a stockholder or group of
stockholders may include director candidates that they have nominated in our annual meeting proxy
statement. These proxy access provisions of our Bylaws provide, among other things, that a stockholder
or group of up to twenty stockholders seeking to include director candidates in our annual meeting
proxy statement must own 3% or more of HP’s outstanding common stock continuously for at least the
previous three years. The number of stockholder-nominated candidates appearing in any annual
meeting proxy statement cannot exceed 20% of the number of directors then serving on the Board. If
20% is not a whole number, the maximum number of stockholder-nominated candidates would be the
closest whole number below 20%. Based on the current Board size of 12 directors, the maximum
number of proxy access candidates that we would be required to include in our proxy materials for an
annual meeting is two. Nominees submitted under the proxy access procedures that are later withdrawn
or are included in the proxy materials as Board-nominated candidates will be counted in determining
whether the 20% maximum has been reached. If the number of stockholder-nominated candidates
exceeds 20%, each nominating stockholder or group of stockholders may select one nominee for
inclusion in our proxy materials until the maximum number is reached. The order of selection would be
15
determined by the amount (largest to smallest) of shares of HP common stock held by each nominating
stockholder or group of stockholders. The nominating stockholder or group of stockholders also must
deliver the information required by our Bylaws, and each nominee must meet the qualifications
required by our Bylaws. Requests to include stockholder-nominated candidates in our proxy materials
for next year’s annual meeting must be received by the Corporate Secretary:
• Not earlier than the close of business on October 20, 2014; and
• Not later than the close of business on November 19, 2014.
34.
How may I obtain a copy of the provisions of our Bylaws regarding stockholder proposals and
director nominations?
You may contact the Corporate Secretary at our principal executive offices for a copy of the
relevant Bylaws provisions regarding the requirements for making stockholder proposals and
nominating director candidates. Our Bylaws also are available on our website at
www.hp.com/hpinfo/investor/bylaws.
Further Questions
35.
Who can help answer my questions?
If you have any questions about the annual meeting or how to vote or revoke your proxy, you
should contact our proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Stockholders: (877) 750-5838 (U.S. and Canada)
(412) 232-3651 (International)
Banks and brokers (call collect):
(212) 750-5833
16
CORPORATE GOVERNANCE
Corporate Governance Highlights
We are committed to implementing and following high standards of corporate governance,
which we believe are important to the success of our business, creating stockholder value and
maintaining our integrity in the marketplace.
Stockholder input has been valuable as we continue to evolve our corporate governance
policies and practices. Our Board and our management are committed to continued active engagement
with our stockholders throughout the year and taking that feedback into account as we continue to
evolve those policies and practices. The following examples highlight the variety of changes we made
during the past year to strengthen our corporate governance policies and practices:
• Added New Board Talent. We have evolved the composition of the Board using selection
criteria such as high professional and personal ethics and values consistent with our
longstanding values and standards, broad policy-making experience and a commitment to
enhancing stockholder value to identify director candidates. In July 2013, Mr. Bennett,
Mr. Ozzie and Mr. Skinner were elected to the Board, adding fresh talent and perspective as
well as significant financial, technology and operational experience. For example:
• Mr. Bennett previously served as the President and Chief Executive Officer of
Liberty Media Corporation and has held various financial management positions
during the course of his career. Mr. Bennett brings, among other skills and
experience, added financial expertise to the Board. As part of the Board’s
governance outreach program with stockholders, Mr. Bennett was recommended by
a stockholder.
• Mr. Ozzie previously served as the Chief Software Architect of Microsoft
Corporation and is a founder and the Chief Executive Officer of Talko Inc.
Mr. Ozzie brings significant experience in the technology industry to the Board as we
continue our efforts at innovation.
• Mr. Skinner previously served as the Vice Chairman and Chief Executive Officer of
McDonald’s Corporation and is currently the non-executive Chairman of
Walgreen Co. Mr. Skinner brings a depth of understanding of the strategic,
operational and financial issues facing large global public companies to the Board.
• Designated Non-Executive Chairman. In April 2013, the Board designated Mr. Whitworth as
the independent, non-executive Chairman of the Board on an interim basis. The Board’s
preferred governance structure is to separate the roles of Chairman and CEO because it
allows our CEO to focus primarily on our business strategy and operations, while leveraging
the experience of the Chairman.
• Implemented Proxy Access. We were one of the first U.S. companies to implement
stockholder proxy access. At our 2013 annual meeting of stockholders, we proposed an
amendment to our bylaws that would permit stockholders satisfying certain eligibility
requirements to include stockholder-nominated director candidates in HP’s proxy materials.
Stockholders generally supported this proposal, which was approved by the holders of
approximately 68% of the outstanding shares.
• Eliminated Supermajority Voting Thresholds. In response to feedback from stockholders, the
Board approved an amendment to our Bylaws to replace the two-thirds supermajority voting
17
threshold in our Bylaws for stockholders to amend certain sections of our Bylaws with a
lower majority of outstanding shares voting threshold. Neither our Bylaws nor our charter
require a greater than a majority vote on any matter put to a vote of stockholders.
• Implemented a Comprehensive Governance Outreach Program. In 2013, we implemented a
more comprehensive governance outreach program aimed at (i) engaging in proactive
outreach with stockholders and key advisory groups, (ii) enhancing relationships with our
institutional stockholders’ governance representatives, (iii) providing improved transparency
into our efforts to improve and deliver results for our stockholders, and (iv) providing more
avenues of outreach to all stockholders. As part of this governance outreach program, we
conducted a governance roadshow enabling several of our directors to meet directly with
major stockholders, and we initiated a director video interview series through which directors
address specific issues of importance to stockholders, such as capital allocation, board
dynamics and our overall compensation philosophy, via pre-recorded videos posted on our
website.
The Board is committed to continuing its active engagement with stockholders, and evaluating
and improving our corporate governance policies and practices. During 2014, the Board is planning to:
• Continue to evolve the Board and search for the next Chairman of the Board.
• Continue to engage with stockholders both directly and through the ongoing video interview
series.
• Continue to seek and encourage feedback from stockholders about our corporate governance
practices by conducting additional governance outreach throughout the year.
We maintain a code of business conduct and ethics for directors, officers and employees,
known as our Standards of Business Conduct. We also have adopted Corporate Governance Guidelines,
which, in conjunction with our Certificate of Incorporation, Bylaws and respective charters of the Board
committees, form the framework for our governance. All of these documents are available at
www.hp.com/investor/corpgovernance/highlights for review, downloading and printing. We will post on
this website any amendments to the Standards of Business Conduct or waivers of the Standards of
Business Conduct for directors and executive officers. Stockholders may request free printed copies of
our Certificate of Incorporation, Bylaws, Standards of Business Conduct, Corporate Governance
Guidelines and charters of the committees of the Board by contacting:
Hewlett-Packard Company
Attention: Investor Relations
3000 Hanover Street
Palo Alto, California 94304
(866) 869-5335
www.hp.com/investor/home
Board Leadership Structure
The Board is currently led by Ralph V. Whitworth as the non-executive Chairman of the Board
on an interim basis. This reflects the Board’s preferred governance structure of a separate Chairman
and CEO, but the Board’s leadership structure may vary in the future as circumstances warrant. The
Board believes that this structure best serves the interests of stockholders because it allows our CEO to
focus primarily on our business strategy and operations, while leveraging the experience of the
Chairman. In connection with Mr. Whitworth’s designation as an independent, non-executive Chairman
18
of the Board on an interim basis, the Board eliminated the role of Lead Independent Director effective
April 4, 2013. Rajiv L. Gupta served as Lead Independent Director from November 2011 until April
2013, and he continues to serve as a member of the Board.
The Chairman presides at all meetings of the Board, including at executive sessions of the
independent directors. The Chairman, with the CEO and in consultation with the other directors,
schedules and sets the agenda for meetings of the Board. The Chairman oversees the planning of the
annual Board calendar, approves information sent to the Board and assists the Chairs of the Board
committees in preparing agendas for the respective committee meetings. In addition, the Chairman
provides guidance and oversight to management, helps with the formulation and implementation of our
strategic plans and acts as the Board’s liaison to management. The Chairman also has the authority to
call additional executive sessions of the independent directors and to encourage direct dialogue
between all directors and management. The Chairman also chairs our annual meeting of stockholders,
is available to speak on behalf of the Board in limited circumstances, and performs such other
functions and responsibilities as set forth in our Corporate Governance Guidelines or as requested by
the Board from time to time.
Board Structure and Committee Composition
In July 2013, the Board approved an amendment to our Bylaws increasing the number of
directors on the Board from nine to 12. As of the date of this proxy statement, the Board has 12
directors and the following five standing committees: (1) Audit; (2) Finance and Investment; (3) HR
and Compensation (the ‘‘HRC Committee’’); (4) Nominating, Governance and Social Responsibility
(the ‘‘NGSR Committee’’); and (5) Technology. The current committee membership, the number of
meetings held during the last fiscal year and the function of each of these standing committees are
described below. Each of the standing committees operates under a written charter adopted by the
Board. All of the committee charters are available on our website at www.hp.com/investor/
board_charters. The Board and each of the committees has the authority to retain, terminate and
receive appropriate funding from us for outside advisors as the Board and/or each committee deems
necessary.
During fiscal 2013, the Board held nine meetings, six of which included executive sessions.
Each incumbent director serving during fiscal 2013 attended at least 75% of the aggregate of all Board
and applicable committee meetings held during the period that he or she served as a director.
19
Directors are encouraged to attend our annual meeting of stockholders. Of the 11 then-current
directors, nine attended the last annual meeting of stockholders, all of whom were standing for election
at that meeting.
Name of Director
Audit
Finance and
Investment
HR and
Compensation
Nominating,
Governance
and Social
Responsibility
Member
*
*
Member
Technology
Chair
Non-Employee Directors
Marc L. Andreessen
Shumeet Banerji
Member
Member
Robert R. Bennett(1)
Member
Member
Rajiv L. Gupta(2)
Chair
Member
(3)
Raymond J. Lane
Member
Raymond E. Ozzie(4)
Member
Gary M. Reiner
*
Member
*
Patricia F. Russo
James A. Skinner(5)
Member
Member
Ralph V. Whitworth(6)
Chair
Chair
Member
*
Chair
Member
Member
Member
Member
Member
Employee Directors
Ann M. Livermore
Member
Member
Margaret C. Whitman
Former Directors
John H. Hammergren(7)
*
G. Kennedy Thompson(7)
*
*
Number of Meetings in Fiscal 2013
14
7
*
*
8
11
5
*
Former Committee Chair or member.
(1)
Mr. Bennett was elected to the Board and appointed to the Audit Committee and the Finance and Investment
Committee of the Board effective July 15, 2013.
(2)
Mr. Gupta served as Lead Independent Director until the Board eliminated the role effective April 4, 2013. He
continues to serve as a member of the Board.
(3)
Mr. Lane resigned as executive Chairman of the Board effective April 4, 2013 and continues to serve as a member of
the Board.
(4)
Mr. Ozzie was elected to the Board and appointed to the Finance and Investment Committee and the Technology
Committee effective July 15, 2013.
(5)
Mr. Skinner was elected to the Board and appointed to the Audit Committee, the HRC Committee and the NGSR
Committee effective July 15, 2013.
(6)
Mr. Whitworth was designated as the non-executive Chairman of the Board on an interim basis effective April 4, 2013.
(7)
Mr. Hammergren and Mr. Thompson resigned from the Board effective May 24, 2013.
20
Audit Committee
We have an Audit Committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). The Audit Committee assists the
Board in fulfilling its responsibilities for overseeing our financial reporting processes and the audit of
our financial statements, including the integrity of our financial statements, our compliance with legal
and regulatory requirements, the qualifications, independence and performance of the independent
registered public accounting firm, the performance of our internal audit function, and risk assessment
and risk management. The Audit Committee is directly responsible for appointing, overseeing the work
of, and evaluating and determining the compensation of the independent registered public accounting
firm. The Audit Committee also, among other things, prepares the Audit Committee report for
inclusion in the annual proxy statement; annually reviews its charter and performance; reviews and
approves the scope of the annual audit, the audit fee and the financial statements; reviews our
disclosure controls and procedures, internal controls, information security policies, internal audit
function, and corporate policies with respect to financial information and earnings guidance; reviews
regulatory and accounting initiatives and off-balance sheet structures; oversees our compliance
programs with respect to legal and regulatory requirements; oversees investigations into complaints
concerning the federal securities laws; and reviews risks facing HP and management’s approach to
addressing these risks, including significant risks or exposures relating to litigation and other
proceedings and regulatory matters that may have a significant impact on our financial statements, and
discusses policies with respect to risk assessment and risk management. The Audit Committee works
closely with management as well as the independent registered public accounting firm.
The Board determined that each of Mr. Gupta, chair of the Audit Committee, and Audit
Committee members Mr. Banerji, Mr. Bennett, and Mr. Skinner is independent within the meaning of
the New York Stock Exchange (‘‘NYSE’’) standards of independence for directors and audit committee
members and has satisfied the NYSE financial literacy requirements. The Board also determined that
each of them is an ‘‘audit committee financial expert’’ as defined by the SEC rules.
The report of the Audit Committee is included on page 98.
Finance and Investment Committee
The Finance and Investment Committee provides oversight to the finance and investment
functions of HP. The Finance and Investment Committee reviews or oversees significant treasury
matters such as capital structure and allocation strategy, derivative policy, global liquidity, fixed income
investments, borrowings, currency exposure, dividend policy, share issuances and repurchases, and
capital spending; oversees our loans and loan guarantees of third-party debt and obligations; reviews
our Financial Services’ capitalization and operations, including residual and credit management, risk
concentration, and return on invested capital; and reviews the activities of our Investor Relations
department. The Finance and Investment Committee also assists the Board in evaluating investment,
acquisition, enterprise services, joint venture and divestiture transactions in which we engage as part of
our business strategy from time to time and reports and makes recommendations to the Board as to
scope, direction, quality, investment levels and execution of such transactions; evaluates and revises our
approval policies with respect to such transactions; oversees our integration planning and execution and
the financial results of such transactions after integration; evaluates the execution, financial results and
integration of our completed transactions; annually review and approve certain swaps and other
derivative transactions; and oversees and approves our strategic alliances.
21
HR and Compensation Committee
The HRC Committee discharges the Board’s responsibilities relating to the compensation of
our executives and directors; reviews and approves the Compensation Discussion and Analysis required
by the SEC for inclusion in the annual proxy statement; provides general oversight of our total rewards
compensation structure; reviews and provides guidance on our human resources programs; and retains
and approves retention terms of the HRC Committee’s compensation consultants and other
compensation experts. Other specific duties and responsibilities of the HRC Committee include
reviewing senior management selection and overseeing succession planning, including reviewing the
leadership development process; reviewing and approving objectives relevant to executive officer
compensation and evaluating performance and determining the compensation of executive officers in
accordance with those objectives; approving severance arrangements and other applicable agreements
and policies for executive officers; overseeing our equity and incentive compensation plans; overseeing
non-equity-based benefit plans and approving any changes to such plans involving a material financial
commitment by HP; monitoring workforce management programs; establishing compensation policies
and practices for service on the Board and its committees, including annually reviewing the appropriate
level of director compensation and recommending to the Board any changes to that compensation;
adopting and monitoring compliance with stock ownership guidelines and policies for directors and
executive officers; annually assessing whether the work of compensation consultants has raised any
conflict of interest; and annually evaluating its performance and its charter. The HRC Committee may
create a subcommittee consisting of one or more of its members and may delegate any of its duties and
responsibilities to such subcommittee, unless otherwise prohibited by applicable laws or listing
standards. In addition, the HRC Committee may delegate any of its duties and responsibilities,
including the administration of equity incentive or employee benefit plans, to one or more of its
members, to one or more other directors, or to one or more other persons, unless otherwise prohibited
by applicable laws or listing standards.
The Board determined that each of Ms. Russo, chair of the HRC Committee, and the HRC
Committee Members, Mr. Banerji, Mr. Skinner and Mr. Whitworth, is independent within the meaning
of the NYSE standards of independence for directors and compensation committee members.
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the HRC Committee during fiscal 2013 was or is an
officer or employee of HP. During fiscal 2013, none of our executive officers served on the board of
directors or on the compensation committee of any other entity, any officers of which served either on
our Board or on our HRC Committee.
Nominating, Governance and Social Responsibility Committee
The NGSR Committee identifies and recommends candidates to be nominated for election as
directors at our annual meeting, consistent with criteria approved by the Board; develops and regularly
reviews corporate governance principles, including our Corporate Governance Guidelines and related
policies, for approval by the Board; oversees the organization of the Board to discharge the Board’s
duties and responsibilities properly and efficiently; and sees that proper attention is given and effective
responses are made to stockholder concerns regarding corporate governance matters. Other specific
duties and responsibilities of the NGSR Committee include annually assessing the size and composition
of the Board, including developing and reviewing director qualifications for approval by the Board;
identifying and recruiting new directors and considering candidates proposed by stockholders;
recommending assignments of directors to Board committees; conducting a review of director
independence and financial literacy and expertise of Audit Committee members; and overseeing
director orientation and continuing education. The NGSR Committee also reviews proposed changes to
22
our Certificate of Incorporation, Bylaws and Board committee charters; assesses and makes
recommendations regarding stockholder rights plans or other stockholder protections, as appropriate;
establishes policies and procedures for the review and approval of related-person transactions and
conflicts of interest, including the review and approval of all potential ‘‘related-person transactions’’ as
defined under SEC rules; reviews and approves the designation of any employee directors or executive
officers for purposes of Section 16 of the Exchange Act (the ‘‘Section 16 officers’’) standing for election
for outside for-profit boards of directors; reviews stockholder proposals and recommends Board
responses; oversees the annual self-evaluation of the Board and its committees; oversees the annual
evaluation of the CEO conducted by Chairman, in conjunction with the HRC Committee, with input
from all Board members; oversees the HRC Committee’s evaluation of senior management; and
reviews requests for indemnification under our Bylaws. In addition, the NGSR Committee identifies,
evaluates and monitors social, political and environmental trends, issues, concerns, legislative proposals
and regulatory developments that could significantly affect the public affairs of HP; reviews, assesses,
reports and provides guidance to management and the full Board relating to activities, policies and
programs with respect to public policy matters; may review, assess, report and provide guidance to
management the Board regarding our policies and programs relating to global citizenship (which
includes, among other things, human rights, privacy, sustainability and corporate social responsibility)
and the impact of our operations on employees, customers, suppliers, partners and communities
worldwide, as well as review our annual Global Citizenship Report; and oversees the HP Political
Action Committee and the policies relating to, and the manner in which we conduct, our government
affairs activities.
Technology Committee
The Technology Committee assesses the health of our technology strategies and the scope and
quality of our intellectual property. The Technology Committee makes recommendations to the Board
as to scope, direction, quality, investment levels and execution of our technology strategies; oversees the
execution of technology strategies formulated by management; provides guidance on technology as it
may pertain to, among other things, market entry and exit, investments, mergers, acquisitions and
divestitures, new business divisions and spin-offs, research and development investments, and key
competitor and partnership strategies; and reviews and makes recommendations on proposed
investment, acquisition, joint venture and divestiture transactions with a value of at least $200 million
that involve technology pursuant to our mergers and acquisitions approval policies.
Board Risk Oversight
The Board, with the assistance of committees of the Board as discussed below, reviews and
oversees our enterprise risk management (‘‘ERM’’) program, which is an enterprise-wide program
designed to enable effective and efficient identification of and management visibility into critical
enterprise risks and to facilitate the incorporation of risk considerations into decision making. The
ERM program was established to clearly define risk management roles and responsibilities, to bring
together senior management to discuss risk, promote visibility and constructive dialogue around risk at
the senior management and Board levels, and to facilitate appropriate risk response strategies. Under
the ERM program, management develops a holistic portfolio of our enterprise risks by facilitating
business and function risk assessments, performing targeted risk assessments, and incorporating
information regarding specific categories of risk gathered from various internal HP organizations.
Management then develops risk response plans for risks categorized as needing management focus and
response and monitors other identified risk focus areas. Management provides regular reports on the
risk portfolio and risk response efforts to senior management and to the Audit Committee.
23
The Board oversees management’s implementation of the ERM program, including reviewing
our enterprise risk portfolio and evaluating management’s approach to addressing identified risks.
Various other committees of the Board also have responsibilities for oversight of risk management that
supplement the ERM program. For example, the HRC Committee considers the risks associated with
our compensation policies and practices as discussed below, the Finance and Investment Committee is
responsible for overseeing financial risks, and the NGSR Committee oversees risks associated with our
governance structure and processes. The Board is kept informed of its committees’ risk oversight and
related activities primarily through reports of the committee chairmen to the full Board. In addition,
the Audit Committee escalates issues relating to risk oversight to the full Board as appropriate to keep
the Board appropriately informed of developments that could affect our risk profile or other aspects of
our business. The Board also considers specific risk topics in connection with strategic planning and
other matters.
Compensation Risk Assessment
During fiscal 2013, we undertook a review of our material compensation processes, policies and
programs for all employees and determined that our compensation programs and practices are not
reasonably likely to have a material adverse effect on HP. In conducting this assessment, we reviewed
our compensation risk infrastructure, including our material plans, our risk control systems and
governance structure, the design and oversight of our compensation programs and the developments,
improvements and other changes made to those programs since fiscal 2012, and presented a summary
of the findings to the HRC Committee. Overall, we believe that our programs generally contain a
balance of fixed and variable features and short- and long-term incentives, as well as complementary
metrics and reasonable, performance-based goals with linear payout curves under most plans. We
believe that these factors, combined with effective management oversight, operate to mitigate risk and
reduce the likelihood of employees engaging in excessive risk-taking behavior with respect to the
compensation-related aspects of their jobs.
Director Independence
Our Corporate Governance Guidelines provide that a substantial majority of the Board will
consist of independent directors and that the Board can include no more than three directors who are
not independent directors. These standards are available on our website at
www.hp.com/investor/director_standards. Our director independence standards reflect the NYSE
corporate governance listing standards. In addition, each member of the Audit Committee meets the
heightened independence standards required for audit committee members under the applicable listing
standards and each member of the HRC Committee meets the heightened independence standards
required for compensation committee members under the applicable listing standards.
Under our Corporate Governance Guidelines, a director will not be considered independent in
the following circumstances:
(1)
The director is, or has been within the last three years, an employee of HP, or an
immediate family member of the director is, or has been within the last three years, an
executive officer of HP.
(2)
The director has been employed as an executive officer of HP, its subsidiaries or
affiliates within the last five years.
(3)
The director has received, or has an immediate family member who has received,
during any twelve-month period within the last three years, more than $100,000 in
24
direct compensation from HP, other than compensation for Board service,
compensation received by a director’s immediate family member for service as a
non-executive employee of HP, and pension or other forms of deferred compensation
for prior service with HP that is not contingent on continued service.
(4)
(A) The director or an immediate family member is a current partner of the firm that
is our internal or external auditor; (B) the director is a current employee of such a
firm; (C) the director has an immediate family member who is a current employee of
such a firm and who participates in the firm’s audit, assurance or tax compliance (but
not tax planning) practice; or (D) the director or an immediate family member was
within the last three years (but is no longer) a partner or employee of such a firm and
personally worked on our audit within that time.
(5)
The director or an immediate family member is, or has been in the past three years,
employed as an executive officer of another company where any of our present
executive officers at the same time serves or has served on that company’s
compensation committee.
(6)
The director is a current employee, or an immediate family member is a current
executive officer, of a company that has made payments to, or received payments from,
HP for property or services in an amount which, in any of the last three fiscal years,
exceeds the greater of $1 million or 2% of such other company’s consolidated gross
revenues.
(7)
The director is affiliated with a charitable organization that receives significant
contributions from HP.
(8)
The director has a personal services contract with HP or an executive officer of HP.
For these purposes, an ‘‘immediate family member’’ includes a director’s spouse, parents,
step-parents, children, step-children, siblings, mother-in-law, father-in-law, sons-in-law, daughters-in-law,
brothers-in-law, sisters-in-law, and any person (other than tenants or employees) who shares the
director’s home.
In determining independence, the Board reviews whether directors have any material
relationship with HP. An independent director must not have any material relationship with HP, either
directly or as a partner, stockholder or officer of an organization that has a relationship with HP, nor
any relationship that would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. In assessing the materiality of a director’s relationship to HP, the Board
considers all relevant facts and circumstances, including consideration of the issues from the director’s
standpoint and from the perspective of the persons or organizations with which the director has an
affiliation, and is guided by the standards set forth above.
In making its independence determinations, the Board considered transactions occurring since
the beginning of fiscal 2011 between HP and entities associated with the independent directors or their
immediate family members. The Board’s independence determinations included consideration of the
following transactions:
• During fiscal 2013, each of Mr. Banerji and Mr. Hammergren was an executive officer of a
company with which HP entered into transactions for the purchase and sale of goods and
services in the ordinary course of its business during the past three fiscal years. The amount
that HP paid in each of the last three fiscal years to each of these companies, and the
25
amount received in each fiscal year by HP from each company, did not, in any of the
previous three fiscal years, exceed the greater of $1 million or 2% of the recipient’s
consolidated gross revenues.
• Each of Mr. Andreessen, Mr. Banerji, Mr. Gupta, Mr. Reiner, Ms. Russo, and
Mr. Whitworth, or one of their immediate family members, is a non-employee director,
trustee or advisory board member of another company that did business with HP at some
time during the past three fiscal years. These business relationships were as a supplier or
purchaser of goods or services in the ordinary course of business.
• Each of Mr. Andreessen and Mr. Banerji, or one of their immediate family members, serves
as a non-employee director, trustee or advisory board member for one or more charitable
institutions to which HP has made charitable contributions during the previous three fiscal
years. Contributions by HP (including employee-matching contributions and discretionary
contributions by HP) to each charitable institution other than Stanford Hospital and Clinics
did not exceed $100,000 in any of the previous three fiscal years. Since the beginning of
fiscal 2011, contributions by HP (including employee-matching contributions and
discretionary contributions by HP) to Stanford Hospital and Clinics totaled approximately
$11,700,000. Mr. Andreessen is a member of the board of directors of Stanford Hospital and
Clinics.
As a result of this review, the Board has determined the transactions described above would
not reasonably impair the director’s ability to act in our stockholders’ best interest. The Board has also
determined that, with the exception of Mr. Lane, each current non-employee director, including
Mr. Andreessen, Mr. Banerji, Mr. Bennett, Mr. Gupta, Mr. Ozzie, Mr. Reiner, Ms. Russo, Mr. Skinner
and Mr. Whitworth, and each of the members of the Audit Committee, the HRC Committee and the
NGSR Committee, has no material relationship with HP (either directly or as a partner, stockholder or
officer of an organization that has a relationship with HP) and is independent within the meaning of
our director independence standards. In addition, the Board has determined that Mr. Hammergren and
Mr. Thompson, each of whom served on the Board during fiscal 2013, were independent directors. The
Board has determined that Mr. Lane is not independent because of his former role as executive
Chairman, Ms. Livermore is not independent because she is an employee of HP and was an executive
officer of HP within the last five fiscal years, and Ms. Whitman is not independent because of her
status as our current President and CEO.
Executive Sessions
During fiscal 2013, the directors met in executive session six times, of which five included an
additional executive session of the non-management directors and at least one included an additional
executive session of only the independent directors. Mr. Gupta, who was serving as Lead Independent
Director, scheduled and chaired each executive session held prior to April 4, 2013. In connection with
the designation of Mr. Whitworth as an independent, non-executive Chairman of the Board, the Board
eliminated the role of Lead Independent Director effective April 4, 2013. Thereafter, Mr. Whitworth
scheduled and chaired each executive session held during the remainder of fiscal 2013. Any
independent director may request that an additional executive session be scheduled.
Director Nominees
Stockholder Recommendations
The policy of the NGSR Committee is to consider properly submitted stockholder
recommendations of candidates for membership on the Board as described below under ‘‘Identifying
26
and Evaluating Candidates for Directors.’’ In evaluating such recommendations, the NGSR Committee
seeks to achieve a balance of knowledge, experience and capability on the Board and to address the
membership criteria set forth below under ‘‘Proposal No. 1 Proposals to be Voted on—Election of
Directors—Director Nominee Experience and Qualifications.’’ Any stockholder recommendations
submitted for consideration by the NGSR Committee should include verification of the stockholder
status of the person submitting the recommendation and the recommended candidate’s name and
qualifications for Board membership and should be addressed to:
Corporate Secretary
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, California 94304
Fax: (650) 857-4837
Stockholder Nominations
In addition, our Bylaws permit stockholders to nominate directors for consideration at an
annual stockholder meeting and, under certain circumstances, to include their nominees in the HP
proxy statement. For a description of the process for nominating directors in accordance with our
Bylaws, see ‘‘Questions and Answers—Stockholder Proposals, Director Nominations and Related Bylaw
Provisions—How may I recommend individuals to serve as directors and what is the deadline for a
director recommendation?’’
Identifying and Evaluating Candidates for Directors
The NGSR Committee uses a variety of methods for identifying and evaluating nominees for
director. The NGSR Committee, in consultation with the Chairman, regularly assesses the appropriate
size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise.
In the event that vacancies are anticipated, or otherwise arise, the NGSR Committee considers various
potential candidates for director. Candidates may come to the attention of the NGSR Committee
through current Board members, professional search firms, stockholders or other persons. Identified
candidates are evaluated at regular or special meetings of the NGSR Committee and may be
considered at any point during the year. As described above, the NGSR considers properly submitted
stockholder recommendations of candidates for the Board to be included in our proxy statement.
Following verification of the stockholder status of individuals proposing candidates, recommendations
are considered collectively by the NGSR Committee at a regularly scheduled meeting, which is
generally the first or second meeting prior to the issuance of the proxy statement for our annual
meeting. If any materials are provided by a stockholder in connection with the nomination of a director
candidate, such materials are forwarded to the NGSR Committee. The NGSR Committee also reviews
materials provided by professional search firms and other parties in connection with a nominee who is
not proposed by a stockholder. In evaluating such nominations, the NGSR Committee seeks to achieve
a balance of knowledge, experience and capability on the Board.
We engage a professional search firm on an ongoing basis to identify and assist the NGSR
Committee in identifying, evaluating and conducting due diligence on potential director nominees. The
three directors who joined the Board since the last annual meeting of stockholders, Mr. Bennett was
identified by a stockholder, Mr. Ozzie was identified by a director and Mr. Skinner was identified by a
professional search firm.
27
Board Policy Regarding Voting for Directors
Our Bylaws provide for a majority vote standard in the election of directors, meaning that, for
a nominee to be elected, the number of shares voted ‘‘for’’ the nominee must exceed the votes cast
‘‘against’’ the nominee’s election. In addition, we have adopted a policy whereby any incumbent
director nominee who receives a greater number of votes ‘‘against’’ his or her election than votes ‘‘for’’
such election will tender his or her resignation for consideration by the NGSR Committee. The NGSR
Committee will recommend to the Board the action to be taken with respect to such offer of
resignation.
Communications with the Board
Individuals may communicate with the Board by contacting:
Secretary to the Board of Directors
3000 Hanover Street, MS 1050
Palo Alto, California 94304
e-mail: bod@hp.com
All directors have access to this correspondence. In accordance with instructions from the
Board, the Secretary to the Board reviews all correspondence, organizes the communications for review
by the Board and posts communications to the full Board or to individual directors, as appropriate.
Our independent directors have requested that certain items that are unrelated to the Board’s duties,
such as spam, junk mail, mass mailings, solicitations, resumes and job inquiries, not be posted.
Communications that are intended specifically for the Chairman of the Board, the independent
directors or the non-employee directors should be sent to the e-mail address or street address noted
above, to the attention of the Chairman of the Board.
28
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES
Employee directors do not receive any separate compensation for their Board activities. In
fiscal 2013, non-employee directors received the compensation described below.
Each non-employee director serving during fiscal 2013 was entitled to receive an annual cash
retainer of $100,000. Non-employee directors may elect to defer up to 50% of their annual cash
retainer, and, in lieu of the annual cash retainer, non-employee directors may elect to receive an
equivalent amount of securities.
Each non-employee director was also entitled to receive an annual equity retainer of $175,000
for service during fiscal 2013. Under special circumstances, the annual equity retainer may be paid in
cash. Typically, the annual equity retainer is paid at the election of the director either entirely in
restricted stock units (‘‘RSUs’’) or in equal amounts of RSUs and stock options. Non-employee
directors may elect to defer all or a portion of any RSUs received as an annual equity retainer;
however, non-employee directors may not defer any stock options received as an annual equity retainer.
The number of shares subject to the RSU awards is determined based on the fair market value of our
stock on the grant date, and the number of shares subject to the stock option awards is determined as
of the grant date based on a Black-Scholes-Merton option pricing formula. Non-employee directors are
entitled to receive dividend equivalent units with respect to RSUs. RSUs and stock options generally
vest after one year from the date of grant.
In addition to the annual cash and equity retainers, non-employee directors who served as
chairs of standing committees during fiscal 2013 received a retainer for such service in the amount of
$20,000 for the chair of the Audit Committee, $15,000 for the chair of the HRC Committee, and
$10,000 for the chair of the other Board committees. Each non-employee director receives $2,000 for
Board meetings attended in excess of ten per Board term (which begins in March and ends the
following February), and $2,000 for each committee meeting attended in excess of a total of ten
meetings of each committee per Board term.
Non-employee directors are reimbursed for their expenses in connection with attending Board
meetings (including expenses related to spouses when spouses are invited to attend Board events), and
non-employee directors may use the company aircraft for travel to and from Board meetings and other
company events. Each non-employee director also is eligible to participate in the product matching
portion of the HP Employee Giving Program under which each non-employee director may contribute
up to $100,000 worth of our products each year to a qualified charity by paying 25% of the list price of
those products, with HP contributing the remaining cost.
29
Fiscal 2013 Director Compensation
The following table provides information on compensation for directors who served during
fiscal 2013:
Fees Earned or
Paid in Cash(1) Stock Awards(2)
($)
($)
Name
Marc L. Andreessen . . .
Shumeet Banerji . . . . . .
Robert R. Bennett(4) . . . .
Rajiv L. Gupta . . . . . . .
Raymond J. Lane(5) . . . .
Ann M. Livermore(6) . . .
Raymond E. Ozzie(4) . . .
Gary M. Reiner . . . . . . .
Patricia F. Russo . . . . . .
James A. Skinner(4) . . . .
Margaret C. Whitman(7) .
Ralph V. Whitworth . . . .
John H. Hammergren(8) .
G. Kennedy Thompson(8)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
10,000
2,000
29,863
136,730
—
—
29,863
11,708
115,000
29,863
—
107,708
4,292
12,585
275,020
275,020
109,818
87,517
275,020
—
109,818
137,510
175,014
109,818
—
175,014
18,100
18,100
Option
Awards(2)
($)
All Other
Compensation(3)
($)
Total
($)
—
—
—
87,641
—
—
—
137,719
—
—
—
—
—
—
—
798
—
33,098
—
—
—
—
—
—
—
—
21,831
—
285,020
277,818
139,681
344,986
275,020
—
139,681
286,937
290,014
139,681
—
282,722
44,223
30,685
(1)
For purposes of determining director compensation, the term of office for directors begins in
March and ends the following February, which does not coincide with our November through
October fiscal year. Cash amounts included in the table above represent the portion of the
annual retainers, committee chair fees, Lead Independent Director fees, Non-Executive
Chairman fees and additional meeting fees earned with respect to service during fiscal 2013.
See ‘‘Additional Information about Fees Earned or Paid in Cash in Fiscal 2013’’ below.
(2)
Represents the grant date fair value of stock options and stock awards granted in fiscal 2013
calculated in accordance with applicable accounting standards relating to share-based
payment awards. For awards of RSUs, that amount is calculated by multiplying the closing
price of HP’s stock on the date of grant by the number of units awarded. For option awards,
that amount is calculated by multiplying the Black-Scholes-Merton value determined as of
the date of grant by the number of options awarded. For information on the assumptions
used to calculate the value of the stock awards, refer to Note 2 to our Consolidated
Financial Statements in our Annual Report on Form 10-K for the fiscal year ended
October 31, 2013, as filed with the SEC on December 30, 2013. See ‘‘Additional Information
about Non-Employee Director Equity Awards’’ below.
(3)
Amounts in this column represent the cost to HP of product donations made on behalf of
non-employee directors.
(4)
Mr. Bennett, Mr. Ozzie and Mr. Skinner were elected to the Board effective July 15, 2013.
Accordingly, the dollar amounts shown reflect pro-rated fees earned for service during the
portion of the first eight months of the March 2013 through February 2014 Board term.
(5)
In fiscal 2011, Mr. Lane received a special equity award in connection with his appointment
as executive Chairman of the Board. During fiscal 2012, the independent members of the
Board determined that, because of that award, Mr. Lane would not receive an annual
retainer for the March 2012 through February 2013 Board term. Effective April 4, 2013,
Mr. Lane resigned as executive Chairman of the Board.
30
(6)
Ms. Livermore was throughout fiscal 2013 and continues to be an employee of HP and in
that capacity performs various tasks and works on special projects, including acting as an
advisor to the CEO. Accordingly, Ms. Livermore did not receive any separate compensation
for her Board service. However, Ms. Livermore was paid $850,033 in base salary, received
bonuses totaling $1,352,140 and received other compensation totaling $39,514 with respect to
her employment with HP during fiscal 2013. Ms. Livermore also participated in HP’s benefit
programs during fiscal 2013. Following the appointment of Ms. Whitman as CEO,
Ms. Livermore’s continued employment was determined to be critical for purposes of
providing executive support, and the arrangement under which she remains employed
contemplates that she will continue to receive base pay and be eligible to receive an annual
bonus.
(7)
Ms. Whitman served as President and CEO of HP throughout fiscal 2013. Accordingly, she
did not receive any compensation for her Board service.
(8)
Mr. Hammergren and Mr. Thompson resigned from the Board effective May 24, 2013.
Accordingly, the dollar amounts shown reflect fees earned for service during the last four
months of the March 2012 through February 2013 Board term and pro-rated fees earned for
service during the portion of the first eight months of the March 2013 through February
2014 Board term.
Additional Information about Fees Earned or Paid in Cash in Fiscal 2013
The following table provides additional information about fees earned or paid in cash to
non-employee directors in fiscal 2013:
Name
Marc L. Andreessen . . .
Shumeet Banerji . . . . . .
Robert R. Bennett(4) . . .
Rajiv L. Gupta(5) . . . . . .
Raymond J. Lane . . . . .
Raymond E. Ozzie(4) . . .
Gary M. Reiner(6) . . . . .
Patricia F. Russo . . . . . .
James A. Skinner(4) . . . .
Ralph V. Whitworth(7) . .
John H. Hammergren(8) .
G. Kennedy Thompson(9)
(1)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Annual
Retainers(1)
($)
Committee Chair/
Lead Independent
Director Fees(2)
($)
—
—
29,863
100,000
—
29,863
—
100,000
29,863
100,000
—
—
10,000
—
—
30,730
—
—
5,708
15,000
—
5,708
4,292
8,585
Additional
Meeting Fees(3)
($)
—
2,000
—
6,000
—
—
6,000
—
—
2,000
—
4,000
Total
($)
10,000
2,000
29,863
136,730
—
29,863
11,708
115,000
29,863
107,708
4,292
12,585
The term of office for directors begins in March and ends the following February, which
does not coincide with HP’s November through October fiscal year. The dollar amounts
shown include cash annual retainers earned for service during the last four months of the
31
March 2012 through February 2013 Board term and cash annual retainers earned for service
during the first eight months of the March 2013 through February 2014 Board term.
(2)
Committee chair fees are calculated based on service during each Board term. The dollar
amounts shown include such fees earned for service during the last four months of the
March 2012 through February 2013 Board term and fees earned for service during the first
eight months of the March 2013 through February 2014 Board term.
(3)
Additional meeting fees are calculated based on the number of designated Board meetings
and the number of committee meetings attended during each Board term. The dollar
amounts shown include additional meeting fees earned for meetings attended during the last
four months of the March 2012 through February 2013 Board term and additional meeting
fees earned for meetings attended during the first eight months of the March 2013 through
February 2014 Board term.
(4)
Mr. Bennett, Mr. Ozzie and Mr. Skinner were each elected to the Board effective July 15,
2013. Their pro-rated annual retainer for service as non-employee directors from that date
until the end of fiscal 2013 was paid in cash.
(5)
Mr. Gupta served as Lead Independent Director of the Board from November 2011 to April
2013. The Board eliminated the role of Lead Independent Director effective April 4, 2013 in
connection with the designation of Mr. Whitworth as an independent, non-executive
Chairman of the Board and Mr. Gupta continued to serve as a member of the Board. The
$30,730 reported in this row for Mr. Gupta represents $15,023 paid for his service as Lead
Independent Director for a portion of fiscal 2013, $11,415 paid for his service as chair of the
Audit Committee during a portion of fiscal 2013 and $4,292 paid for his service as chair of
the NGSR Committee during a portion of fiscal 2013.
(6)
The amount paid to Mr. Reiner as committee chair fees represents the amount paid for his
service as chair of the NGSR Committee during a portion of fiscal 2013.
(7)
The amount paid to Mr. Whitworth as committee chair fees represents the amount paid for
his service as chair of the Finance and Investment Committee during a portion of fiscal 2013.
(8)
Mr. Hammergren resigned from the Board effective May 24, 2013. The amount paid to him
as committee chair fees represents the amount paid for his service as chair of the Finance
and Investment Committee during a portion of fiscal 2013.
(9)
Mr. Thompson resigned from the Board effective May 24, 2013. The amount paid to him as
committee chair fees represents the amount paid for his service as chair of the Audit
Committee during a portion of fiscal 2013.
Additional Information about Non-Employee Director Equity Awards
The following table provides additional information about non-employee director equity
awards, including the stock awards and option awards made to non-employee directors during fiscal
32
2013, the grant date fair value of each of those awards and the number of stock awards and option
awards outstanding as of the end of fiscal 2013:
Name
Marc L. Andreessen . .
Shumeet Banerji . . . . .
Robert R. Bennett . . . .
Rajiv L. Gupta . . . . . .
Raymond J. Lane . . . .
Raymond E. Ozzie . . . .
Gary M. Reiner . . . . . .
Patricia F. Russo . . . . .
James A. Skinner . . . .
Ralph V. Whitworth . . .
John H. Hammergren .
G. Kennedy Thompson .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Stock Awards
Granted During
Fiscal 2013
(#)
Option Awards
Granted During
Fiscal 2013
(#)
Grant Date
Fair Value of
Stock and
Option
Awards
Granted
During
Fiscal 2013(1)
($)
13,918
13,918
4,174
4,429
13,918
4,174
6,959
8,857
4,174
8,857
916
916
—
—
—
18,773
—
—
29,500
—
—
—
—
—
275,020
275,020
109,818
175,158
275,020
109,818
275,229
175,014
109,818
175,014
18,100
18,100
Stock Awards
Outstanding at Option Awards
Fiscal Year
Outstanding at
End(2)
Fiscal Year End
(#)
(#)
25,793(3)
14,093
4,203
4,485
14,093
4,203
7,047
8,969
4,203
8,969
—
—
—
—
—
48,296
200,000
—
66,187
—
—
—
45,780
8,364
(1)
Represents the grant date fair value of stock and option awards granted in fiscal 2013
calculated in accordance with applicable accounting standards. For awards of RSUs, that
number is calculated by multiplying the closing price of HP’s stock on the date of grant by
the number of units awarded. For option awards, that amount is calculated by multiplying
the Black-Scholes-Merton value determined as of the date of grant by the number of options
awarded.
(2)
Includes dividend equivalent units paid with respect to outstanding awards of RSUs during
fiscal 2013.
(3)
This amount includes 11,700 shares that Mr. Andreessen has elected to defer from the stock
award (paid in the form of RSUs) that he received as his equity retainer for the March 2012
through February 2013 Board term.
Non-Employee Director Stock Ownership Guidelines
Under our stock ownership guidelines, non-employee directors are required to accumulate
within five years of election to the Board shares of HP’s stock equal in value to at least five times the
amount of their annual cash retainer. Shares counted toward these guidelines include any shares held
by the director directly or indirectly, including deferred vested awards.
All non-employee directors with more than five years of service have met our stock ownership
guidelines or are expected to meet those guidelines following the vesting of outstanding equity awards
during the first half of fiscal 2014, based on current trading prices of HP’s stock. See ‘‘Common Stock
Ownership of Certain Beneficial Owners and Management.’’
33
PROPOSALS TO BE VOTED ON
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Bylaws fix the current number of directors at 12. On the recommendation of the NGSR
Committee, the Board has nominated the 12 persons named below for election as directors this year,
each to serve for a one-year term or until the director’s successor is elected and qualified.
Director Nominee Experience and Qualifications
The Board annually reviews the appropriate skills and characteristics required of directors in
the context of the current composition of the Board, our operating requirements and the long-term
interests of our stockholders. The Board believes that its members should possess a variety of skills,
professional experience and backgrounds in order to effectively oversee our business. In addition, the
Board believes that each director should possess certain attributes, as reflected in the Board
membership criteria described below.
Our Corporate Governance Guidelines contain the current Board membership criteria that
apply to nominees recommended for a position on the Board. Under those criteria, members of the
Board should have the highest professional and personal ethics and values, consistent with our
longstanding values and standards. They should have broad experience at the policy-making level in
business, government, education, technology or public service. They should be committed to enhancing
stockholder value and should have sufficient time to carry out their duties and to provide insight and
practical wisdom based on experience. Their service on other boards of public companies should be
limited to a number that permits them, given their individual circumstances, to perform responsibly all
director duties. Each director must represent the interests of all of our stockholders. Although the
Board uses these and other criteria as appropriate to evaluate potential nominees, it has no stated
minimum criteria for nominees.
The Board believes that all the nominees named below are highly qualified and have the skills
and experience required for effective service on the Board. The nominees’ individual biographies below
contain information about their experience, qualifications and skills that led the Board to nominate
them.
All of the nominees have indicated to us that they will be available to serve as directors. In the
event that any nominee should become unavailable, the proxy holders, Margaret C. Whitman,
Catherine A. Lesjak and John F. Schultz, will vote for a nominee or nominees designated by the Board.
There are no family relationships among our executive officers and directors.
34
Our Board recommends a vote FOR the election to the Board of the each of the following
nominees.
Marc L. Andreessen
Director since 2009
Age 42
Mr. Andreessen is a co-founder of AH Capital Management, LLC,
doing business as Andreessen Horowitz, a venture capital firm
founded in July 2009. From 1999 to 2007, Mr. Andreessen served
as Chairman of Opsware, Inc., a software company that he
co-founded. During a portion of 1999, Mr. Andreessen served as
Chief Technology Officer of America Online, Inc., a software
company. Mr. Andreessen co-founded Netscape Communications
Corporation, a software company, and served in various positions,
including Chief Technology Officer and Executive Vice President of
Products from 1994 to 1999. Mr. Andreessen also is a director of
eBay Inc., Facebook, Inc. and several private companies.
Mr. Andreessen brings to the Board extensive experience as an
Internet entrepreneur. Mr. Andreessen also is a recognized
industry expert and visionary in the IT industry. In addition, he has
extensive leadership, consumer industry and technical expertise
through his positions at Netscape, America Online and Opsware
and his service on the boards of public and private technology
companies. He has also gained valuable experience serving on the
boards of both public and private companies.
Shumeet Banerji
Director since 2011
Age 54
Mr. Banerji served as a senior partner of Booz & Company, a
consulting company, from May 2012 until his retirement in March
2013. Previously, Mr. Banerji served as Chief Executive Officer of
Booz & Company from July 2008 to May 2012. Prior to that,
Mr. Banerji served in multiple roles at Booz Allen Hamilton, a
consulting company and predecessor to Booz & Company, while
based in offices in North America, Asia and Europe, including
President of the Worldwide Commercial Business from February
2008 to July 2008, Managing Director, Europe from 2007 to
February 2008 and Managing Director, United Kingdom from 2003
to 2007. Earlier in his career, Mr. Banerji was a member of the
faculty at the University of Chicago Graduate School of Business.
Mr. Banerji brings to the Board a robust understanding of the
issues facing companies and governments in both mature and
emerging markets around the world through his two decades of
work with Booz & Company. In particular, Mr. Banerji brings
valuable experience in addressing issues ranging from corporate
strategy, organizational structure, governance, transformational
change, operational performance improvement and merger
integration.
35
Robert R. Bennett
Director since 2013
Age 55
Mr. Bennett has served as Managing Director of Hilltop
Investments, LLC, a private investment company, since 2005.
Previously, Mr. Bennett served as President of Discovery Holding
Company, a media and entertainment company, from 2005 to
September 2008. Mr. Bennett also served as President and Chief
Executive Officer of Liberty Media Corporation (now Liberty
Interactive Corporation), a video and on-line commerce company,
from 1997 until 2005 and continued as President until 2006. Prior
to his tenure at Liberty Media, Mr. Bennett worked with
Tele-Communications, Inc. and The Bank of New York.
Mr. Bennett currently serves as a director of Discovery
Communications, Inc., Demand Media, Inc., Liberty Media
Corporation and Sprint Corporation. In January 2014, Mr. Bennett
resigned from the board of directors of Demand Media, Inc.
effective February 28, 2014. Mr. Bennett previously served as a
director of Discovery Holding Company, Liberty Interactive
Corporation and Sprint Nextel Corporation.
Mr. Bennett has extensive knowledge of the capital markets and
other financial and operational issues from his experience as
president and chief executive officer of another public company,
which allows him to provide an important perspective to the
Board’s discussions on financial and operational matters.
Mr. Bennett also has an in-depth understanding of finance and has
held various financial management positions during the course of
his career. He has also gained valuable experience serving on the
boards of both public and private companies.
Rajiv L. Gupta
Director since 2009
Age 68
Mr. Gupta served as Lead Independent Director of the Board
from November 2011 to April 2013. Mr. Gupta has served as
Chairman of Avantor Performance Materials, a manufacturer of
chemistries and materials, since August 2011 and as Senior Advisor
to New Mountain Capital, LLC, a private equity firm, since July
2009. Previously, Mr. Gupta served as Chairman and Chief
Executive Officer of Rohm and Haas Company, a worldwide
producer of specialty materials, from 1999 to April 2009.
Mr. Gupta occupied various other positions at Rohm and Haas
after joining the company in 1971, including Vice Chairman from
1998 to 1999, Director of the Electronic Materials business from
1996 to 1999, and Vice President and Regional Director of the
Asia-Pacific Region from 1993 to 1998. Mr. Gupta also is a
director of Delphi Automotive PLC, Tyco International Ltd., The
Vanguard Group and several private companies.
36
Mr. Gupta brings to the Board extensive experience in executive
leadership at a large global company, international management
experience, and venture capital investment experience. From his
nearly ten years as Chairman and Chief Executive Officer of Rohm
and Haas, Mr. Gupta has a strong operational and strategic
background with significant experience in manufacturing and sales.
He also brings public company governance experience as a
member and chair of boards and board committees of other public
and private companies.
Raymond J. Lane
Director since 2010
Age 67
Mr. Lane served as executive Chairman of HP from September
2011 to April 2013 and as non-executive Chairman of HP from
November 2010 to September 2011. Since April 2013, Mr. Lane
has served as Partner Emeritus of Kleiner Perkins Caufield &
Byers, a private equity firm, after having previously served as one
of its Managing Partners from 2000 to 2013. Prior to joining
Kleiner Perkins, Mr. Lane was President and Chief Operating
Officer and a director of Oracle Corporation, a software company.
Before joining Oracle in 1992, Mr. Lane was a senior partner of
Booz Allen Hamilton, a consulting company. Prior to Booz Allen
Hamilton, Mr. Lane served as a division vice president with
Electronic Data Systems Corporation, an IT services company that
HP acquired in August 2008. Mr. Lane is a director of several
private companies and is a former director of Quest Software, Inc.
Mr. Lane brings to the Board significant experience as an earlystage venture capital investor, principally in the information
technology industry, through his position as Partner Emeritus of
Kleiner Perkins. In addition, having served as President and Chief
Operating Officer of Oracle, Mr. Lane has experience in
worldwide operations, management and the development of
corporate strategy. He has also gained valuable experience serving
in board leadership roles for many public and private companies.
Ann M. Livermore
Director since 2011
Age 55
Ms. Livermore served as Executive Vice President of the former
HP Enterprise Business from 2004 until June 2011 and has served
has served as an Executive Advisor to our CEO since then. Prior
to that, Ms. Livermore served in various other positions with HP in
marketing, sales, research and development, and business
management since joining the company in 1982. Ms. Livermore
also is a director of United Parcel Service, Inc.
Ms. Livermore brings to the Board extensive experience in senior
leadership positions at HP. In addition, through her nearly 30 years
at HP, Ms. Livermore has vast knowledge and experience in the
areas of technology, marketing, sales, research and development
and business management, as well as extensive knowledge of
enterprise customers and their IT needs. Ms. Livermore also brings
public company governance experience from her service on another
public company board.
37
Raymond E. Ozzie
Director since 2013
Age 58
Mr. Ozzie has served as Chief Executive Officer of Talko Inc., a
mobile communications applications and services company, since
founding the company in December 2011. Previously, Mr. Ozzie
served as Chief Software Architect of Microsoft Corporation from
2006 until December 2010 after having served as Chief Technical
Officer of Microsoft from 2005 to 2006. Mr. Ozzie joined
Microsoft in 2005 after Microsoft acquired Groove Networks, Inc.,
a collaboration software company he founded in 1997.
Mr. Ozzie is a recognized software industry executive and
entrepreneur who brings to the Board significant experience in the
software industry. Mr. Ozzie also has extensive leadership and
technical expertise through his positions at Microsoft, Groove
Networks and his experience at other public companies earlier in
his career.
Gary M. Reiner
Director since 2011
Age 59
Mr. Reiner has served as Operating Partner at General Atlantic, a
private equity firm, since November 2011. Previously, Mr. Reiner
served as Special Advisor to General Atlantic from September
2010 to November 2011. Prior to that, Mr. Reiner served as Senior
Vice President and Chief Information Officer at General Electric
Company, a technology, media and financial services company,
from 1996 until March 2010. Mr. Reiner previously held other
executive positions with GE since joining the company in 1991.
Earlier in his career, Mr. Reiner was a partner at Boston
Consulting Group, a consulting company, where he focused on
strategic and process issues for technology businesses. Mr. Reiner
also is a director of Citigroup Inc. and several private companies
and is a former director of Genpact Limited.
Mr. Reiner brings to the Board deep insight into how IT can help
global companies succeed through his many years of experience as
Chief Information Officer at GE. From his other positions at GE
and his prior experience with Boston Consulting Group, he also
brings decades of experience driving corporate strategy,
information technology and best practices across complex
organizations. In addition, Mr. Reiner brings recent experience in
private equity investing focusing on the IT industry.
Patricia F. Russo
Director since 2011
Age 61
Ms. Russo served as Chief Executive Officer of Alcatel-Lucent, a
communications company, from 2006 to September 2008.
Previously, she served as Chairman of Lucent Technologies Inc., a
communications company, from 2003 to 2006 and Chief Executive
Officer and President of Lucent from 2002 to 2006. Ms. Russo also
is a director of Alcoa, Inc., General Motors Company and
Merck & Co., Inc.
In addition to her other public company directorships, she is a
director of KKR Management LLC, the managing partner of
KKR & Co., L.P. Ms. Russo served as a director of ScheringPlough Corporation from 1995 until its merger with Merck in 2009.
38
Ms. Russo brings to the Board extensive global business
experience, a broad understanding of the technology industry,
strong management skills and operational expertise through her
positions with Alcatel-Lucent and Lucent Technologies. In those
positions, she dealt with a wide range of issues including mergers
and acquisitions and business restructurings as she led Lucent’s
recovery through a severe industry downturn and later a merger
with Alcatel. Ms. Russo also brings public company governance
experience as a member of boards and board committees of other
public companies.
James A. Skinner
Director since 2013
Age 69
Mr. Skinner has served as non-executive Chairman of
Walgreen Co. since July 2012 and has served as a director of
Walgreen since 2005. Previously, Mr. Skinner served as Vice
Chairman and Chief Executive Officer of McDonald’s Corporation,
a global restaurant chain, from 2004 to June 2012. Prior to that,
Mr. Skinner served as Vice Chairman of McDonald’s from 2003 to
2004; as President and Chief Operating Officer of McDonald’s
Restaurant Group during a portion of 2002; as President and Chief
Operating Officer of McDonald’s Europe, Asia/Pacific, Middle
East and Africa from 2001 to 2002; and as President of
McDonald’s-Europe from 1997 to 2001. Mr. Skinner currently
serves as a director of Illinois Tool Works Inc. and previously
served as a director of McDonald’s.
Mr. Skinner’s experience serving as the Chief Executive Officer of
McDonald’s, a large global company, as well as his experience in a
range of management positions within McDonald’s, provides him
with great breadth and depth of understanding of the strategic,
operational and financial issues facing large global public
companies. Mr. Skinner also brings public company governance
experience as Chairman of Walgreen and as a member of boards
and board committees of other public companies.
Margaret C. Whitman
Director since 2011
Age 57
Ms. Whitman has served as President and Chief Executive Officer
since September 2011 and as a member of the Board since January
2011. From March 2011 to September 2011, Ms. Whitman served
as a part-time strategic advisor to Kleiner Perkins Caufield &
Byers, a private equity firm. Previously, Ms. Whitman served as
President and Chief Executive Officer of eBay Inc., an online
marketplace and payments company, from 1998 to March 2008.
Prior to joining eBay, Ms. Whitman held executive-level positions
at Hasbro Inc., a toy company, FTD, Inc., a floral products
company, The Stride Rite Corporation, a footwear company, The
Walt Disney Company, an entertainment company, and Bain &
Company, a consulting company. Ms. Whitman also serves as a
director of The Procter & Gamble Company and is a former
director of DreamWorks Animation SKG, Inc. and Zipcar, Inc.
39
Ms. Whitman brings to the Board unique experience in developing
transformative business models, building global brands and driving
sustained growth and expansion through her ten years as President
and Chief Executive Officer of eBay. From her previous executive
positions with other large public companies, she also brings strong
operational and strategic expertise. In addition, Ms. Whitman
brings public company governance experience having previously
served as a member of boards and board committees of other
public companies.
Ralph V. Whitworth
Director since 2011
Age 58
Mr. Whitworth was appointed Chairman on an interim basis in
April 2013. Mr. Whitworth is co-founder and principal of
Relational Investors LLC, a registered investment advisor, founded
in 1996. He also is a former director of Genzyme Corporation,
Sovereign Bancorp, Inc., Sprint Nextel Corporation and seven
other public companies.
Mr. Whitworth brings to the Board expertise in corporate
governance and extensive experience from previously serving as a
director of ten public companies and participating in multiple
national commissions reviewing stockholder rights and corporate
governance. His various governance-related activities include
presenting his views before the United States Congress, the SEC,
the New York Stock Exchange Board and the New York Federal
Reserve on corporate governance and stockholder rights matters.
Mr. Whitworth also has experience in finance, capital allocation,
business operations, investments and acquisitions and divestures
from his twenty years of corporate board activities.
Vote Required
Each director nominee who receives more ‘‘FOR’’ votes than ‘‘AGAINST’’ votes representing
shares of HP common stock present in person or represented by proxy and entitled to be voted at the
annual meeting will be elected.
If you sign your proxy or voting instruction card but do not give instructions with respect to
voting for directors, your shares will be voted by Margaret C. Whitman, Catherine A. Lesjak and
John F. Schultz, as proxy holders. If you wish to give specific instructions with respect to voting for
directors, you may do so by indicating your instructions on your proxy or voting instruction card.
You may cumulate your votes in favor of one or more of the director nominees. If you wish to
cumulate your votes, you will need to indicate explicitly your intent to cumulate your votes among the
12 persons who will be voted upon at the annual meeting. See ‘‘Questions and Answers—Voting
Information—Is cumulative voting permitted for the election of directors?’’ for further information
about how to cumulate your votes. Margaret C. Whitman, Catherine A. Lesjak and John F. Schultz, as
proxy holders, reserve the right to cumulate votes and cast such votes in favor of the election of some
or all of the applicable nominees in their sole discretion, except that a stockholder’s votes will not be
cast for a nominee as to whom such stockholder instructs that such votes be cast ‘‘AGAINST’’ or
‘‘ABSTAIN.’’
If an incumbent director nominee receives a greater number of votes ‘‘AGAINST’’ his or her
election than votes ‘‘FOR’’ such election, he or she is required to tender his or her resignation for
consideration by the NGSR Committee in accordance with Section V of our Corporate Governance
Guidelines and as described under ‘‘Corporate Governance—Board Policy Regarding Voting for
Directors.’’
40
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has appointed, and as a matter of good corporate
governance, is requesting ratification by the stockholders of Ernst & Young LLP as the independent
registered public accounting firm to audit our consolidated financial statements for the fiscal year
ending October 31, 2014. During fiscal 2013, Ernst & Young LLP served as our independent registered
public accounting firm and also provided certain other audit-related and tax services. See ‘‘Principal
Accounting Fees and Services’’ on page 97 and ‘‘Report of the Audit Committee of the Board of
Directors’’ on page 98. Representatives of Ernst & Young LLP are expected to attend the annual
meeting, where they will be available to respond to appropriate questions and, if they desire, to make a
statement.
Vote Required
Ratification of the appointment of Ernst & Young LLP as our independent registered public
accounting firm for the 2014 fiscal year requires the affirmative vote of a majority of the shares of HP
common stock present in person or represented by proxy and entitled to be voted at the annual
meeting. If the appointment is not ratified, the Board will consider whether it should select another
independent registered public accounting firm.
Recommendation of the Board of Directors
Our Board recommends a vote FOR the ratification of the appointment of Ernst & Young LLP
as our independent registered public accounting firm for the 2014 fiscal year.
41
PROPOSAL NO. 3
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
In accordance with SEC rules, our stockholders are being asked to approve, on an advisory or
non-binding basis, the compensation of our named executive officers as disclosed in this proxy
statement.
Our Board and the HRC Committee are committed to excellence in corporate governance and
to executive compensation programs that align the interests of our executives with those of our
stockholders. To fulfill this mission, we have a pay-for-performance philosophy that forms the
foundation for decisions regarding compensation. Our compensation programs have been structured to
balance near-term results with long-term success, and enable us to attract, retain, focus, and reward our
executive team for delivering stockholder value. Please refer to ‘‘Executive Compensation—
Compensation Discussion and Analysis—Executive Summary’’ for an overview of the compensation of
our named executive officers.
Our Board and the HRC Committee believe that we have created a compensation program
that aligns with stockholder interests and merits stockholder support. Accordingly, we are asking for
stockholder approval of the compensation of our named executive officers as disclosed in this proxy
statement in the Compensation Discussion and Analysis, the compensation tables and the narrative
discussion following the compensation tables.
Although this vote is non-binding, the Board and the HRC Committee value the views of our
stockholders and will review the voting results. If there are significant negative notes, we will take steps
to understand those concerns that influenced the vote, and consider them in making future decisions
about executive compensation. We currently conduct annual advisory votes on executive compensation,
and we expect to conduct the next advisory vote at our 2015 annual meeting of stockholders.
Vote Required
The affirmative vote of a majority of the shares of HP common stock present in person or
represented by proxy and entitled to be voted on the proposal at the annual meeting is required for
advisory approval of this proposal.
Recommendation of the Board of Directors
Our Board recommends a vote FOR the approval of the compensation of our named executive
officers, including the Compensation Discussion and Analysis, the compensation tables and narrative
discussion following such compensation tables, and the other related disclosures in this proxy
statement.
42
PROPOSAL NO. 4
STOCKHOLDER PROPOSAL RELATED TO THE FORMATION OF A HUMAN RIGHTS
COMMITTEE
We received a stockholder proposal from Harrington Investments, Inc. The proponent has
requested we include the proposal and supporting statement in this proxy statement, and, if properly
presented, the proposal will be voted on at the annual meeting. We will provide the proponent’s
address and the number of shares that it beneficially owns upon oral or written request of any
stockholder. The stockholder proposal and supporting statement are quoted verbatim in italics below.
HP does not support the adoption of the resolution proposed below and asks stockholders to
consider HP’s response, which follows the stockholder proposal.
STOCKHOLDER PROPOSAL
RESOLVED: To amend Article IV of the By-Laws, by inserting after Section 4.3, a new Section 4.4.
4.4. Board Committee on Human Rights. There is established a Board Committee on Human Rights, to
review the implications of company policies, above and beyond matters of legal compliance, for the human
rights of individuals in the U.S. and worldwide, including assessing the impacts of company operations and
supply chains on resources and public welfare in host communities.
The Board of Directors is authorized, by resolution, in its discretion and consistent with these By-Laws, the
Articles of Incorporation and applicable law to: (1) select the members of the Board Committee on Human
Rights, (2) provide said committee with funds for operating expenses, (3) adopt a charter to govern said
Committee’s operations, (4) empower said Committee to solicit public input and to issue periodic reports to
shareholders and the public, at reasonable expense and excluding confidential information, including but not
limited to an annual report on the findings of the Board Committee, and (5) any other measures within the
Board’s discretion consistent with these By-Laws and applicable law. Nothing herein shall restrict the power
of the Board of Directors to manage the business and affairs of the company. The Board Committee on
Human Rights shall not incur any costs to the company except as authorized by the Board of Directors.
SUPPORTING STATEMENT
Our company has become embroiled in public controversies regarding the human rights implications of
products, services and corporate supply chains. Issues which typically arise for companies in our sector
include labor rights, technology utilized to identify and monitor labor and human rights advocates, and
technology utilized by the police and military to identify and control the movement of ethnic populations
with advanced biometric identification systems. For example, in reports in the media, our company has been
alleged to:
• Supply and maintain biometric access control systems utilized by the Israeli military at
checkpoints inside the occupied Palestinian territory restricting the freedom of movement of
Palestinians.1
1
Who Profits Research Project, Technologies of Control: The Case of Hewlett Packard (The Coalition of
Women for Peace, 2011).
43
• Sell products used by the Syrian government to track citizens’ communications, and route data.2
• Bid for contracts with the Chinese government for products used in the surveillance of its citizens,
raising potential concerns regarding monitoring and targeting of political dissidents.3
While our company has signed voluntary protocols regarding human rights, such statements are not part of
the company’s bylaws.
The proposed by-law would establish a separate Board Committee on Human Rights, which would elevate
board level oversight and governance regarding human rights issues raised by the company’s activities and
policies and provide a vehicle to fulfill the Board’s fiduciary responsibilities.
2
Silver, Vernon. ‘‘H-P Computers Underpin Syria Surveillance.’’ Bloomberg, November 18, 2011.
http://www.bloomberg.com/news/2011-11-18/hewlett-packard-computers-underpin-syria-electonic-surveillanceproject.html
3
Chao, Loretta. ‘‘Cisco Poised to Help China Keep an Eye on Its Citizens.’’ The Wall Street Journal. July 5,
2011. http://online.wsj.com/article/SB10001424052702304778304576377141077267316.html
44
BOARD STATEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL
The Board recommends a vote against this proposal because it is unnecessary and not in the
best interest of stockholders.
HP’s existing governance framework already includes Board-level and executive-level
committees that are responsible for human rights issues. The NGSR Committee1 is responsible for
overseeing, making recommendations, and reporting to the full Board with respect to HP’s policies
regarding corporate social responsibility and global corporate citizenship, including human rights, as
described under ‘‘Corporate Governance—Board Structure and Committee Composition—NGSR
Committee.’’ HP also has a Global Citizenship Council composed of internal human rights experts and
senior leaders that represent major functions at HP that have the potential to impact human rights.
This council provides governance and oversight of HP’s Global Human Rights Policy, and its members
collaborate with external human rights organizations and experts to inform HP’s human rights-related
policies and strategy. The Global Citizenship Council, which meets quarterly, reports to the NGSR
Committee and provides updates to that committee at least annually. Accordingly, the Board believes
that the creation of an additional Board committee to oversee the same HP policies and efforts is
unnecessary.
In addition, the Board believes that the proposal is unduly prescriptive and not in the best
interests of stockholders. The Board is in the best position to determine the most effective governance
structure to oversee HP’s human rights policies and initiatives. As a binding proposal, the proposal
deprives the Board of the flexibility it needs to address its responsibilities in the manner in which it
believes it can do so most effectively in the interest of stockholders.
Respect for universal human rights is and will continue to be a fundamental principle in the
way that HP conducts its business. HP already has a global human rights program that promotes the
respect of human rights in all of HP’s business practices and a robust legal and regulatory compliance
program in place to comply with applicable laws and regulations. HP has recently enhanced its existing
human rights policies and practices. For example, in October 2011, HP expanded its Global Human
Rights Policy to go beyond labor and employment concerns and include other human rights priorities
such as privacy and freedom of expression. HP also has a Supplier Code of Conduct, which requires
that human rights principles be upheld throughout HP’s global supply chain. In addition, in August
2011, HP designated a pan-HP Human Rights Program Manager responsible for implementing due
diligence aligned with the UN Guiding Principles on Business and Human Rights. This includes due
diligence of HP’s efforts to ensure HP’s business practices are aligned with HP’s Global Human Rights
Policy. The Manager is sponsored by the NGSR of the Board.
HP’s existing policies and practices relating to human rights are already consistent with
internationally recognized human rights principles and are shaped and influenced by external human
rights experts and organizations. For example, pursuant to its Global Human Rights Policy, HP upholds
and respects human rights principles reflected in the UN Universal Declaration of Human Rights, the
UN Global Compact, and the UN Guiding Principles on Business and Human Rights. Moreover, HP is
a member of the Global Business Initiative on Human Rights and the Business for Social Responsibility
Human Rights Working Group, which are advised by human rights experts. Additionally, specific
functional areas at HP, such as our Privacy Office and Supply Chain Responsibility teams, are members
of external organizations such as Social Accountability International and The Global Social Compliance
1
In January 2014, the Board approved changing the name of this committee from the ‘‘Nominating and
Governance Committee’’ to the ‘‘Nominating, Governance and Social Responsibility Committee’’,
among other amendments to this committee’s charter.
45
Programme, which have multi-stakeholder governance bodies that include human rights experts. HP is
also a long-standing signatory of the UN Global Compact.
HP issues periodic reports to stockholders and the public that provide transparency around its
human rights activities through an annual Global Citizenship Report. The Global Citizenship Report
addresses HP’s human rights efforts generally as well as more specific areas including supply chain
responsibility, corporate ethics and privacy.
For the foregoing reasons, the Board believes that establishing an additional Board committee
is unnecessary and would not be in the best interest of stockholders. Accordingly, the Board
recommends that you vote AGAINST this proposal.
Vote Required
Approval of this stockholder proposal requires the affirmative vote of a majority of the shares
of HP common stock present in person or represented by proxy and entitled to be voted on the
proposal at the annual meeting.
Recommendation of the Board of Directors
Our Board recommends a vote AGAINST this proposal.
46
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 2013 concerning beneficial
ownership by:
• holders of more than 5% of HP’s outstanding shares of common stock;
• our directors and nominees;
• each of the named executive officers listed in the Summary Compensation Table on page 79;
and
• all of our directors and executive officers as a group.
The information provided in the table is based on our records, information filed with the SEC
and information provided to HP, except where otherwise noted.
The number of shares beneficially owned by each entity or individual is determined under SEC
rules, and the information is not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the entity or individual has sole
or shared voting or investment power and also any shares that the entity or individual has the right to
acquire as of March 1, 2014 (60 days after December 31, 2013) through the exercise of any stock
options, through the vesting of RSUs payable in shares, or upon the exercise of other rights. Beneficial
ownership excludes options or other rights vesting after March 1, 2014 and any RSUs vesting on or
before March 1, 2014 that may be payable in cash or shares at HP’s election. Unless otherwise
indicated, each person has sole voting and investment power (or shares such powers with his or her
spouse) with respect to the shares set forth in the following table.
47
BENEFICIAL OWNERSHIP TABLE
Shares of
Common Stock
Beneficially Owned
Name of Beneficial Owner
Dodge & Cox(1) . . . . . . . . . .
BlackRock, Inc.(2) . . . . . . . .
State Street Corporation(3) .
Marc L. Andreessen(4) . . . . .
Shumeet Banerji . . . . . . . . .
Robert R. Bennett . . . . . . .
Rajiv L. Gupta(5) . . . . . . . .
Raymond J. Lane(6) . . . . . . .
Ann M. Livermore(7) . . . . . .
Raymond E. Ozzie . . . . . . .
Gary M. Reiner(8) . . . . . . . .
Patricia F. Russo . . . . . . . .
James A. Skinner . . . . . . . .
Margaret C. Whitman(9) . . .
Ralph V. Whitworth(10) . . . .
Catherine A. Lesjak(11) . . . .
William L. Veghte(12) . . . . . .
Dion J. Weisler(13) . . . . . . . .
Michael G. Nefkens(14) . . . .
R. Todd Bradley(15) . . . . . . .
All current executive officers
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
and directors as a group (22 persons)(16)
156,597,738
118,017,997
106,224,728
26,172
18,468
0
47,971
381,725
658,562
0
45,922
11,752
0
316,091
29,844,059
176,663
177,123
78,699
102,205
328,968
32,158,316
Percent of
Common Stock
Outstanding
8.0%
6.1%
5.5%
*
*
*
*
*
*
*
*
*
*
*
1.6%
*
*
*
*
*
1.9%
*
Represents holdings of less than 1%.
(1)
Based on the most recently available Schedule 13G filed with the SEC on February 13, 2013 by
Dodge & Cox. According to its Schedule 13G, Dodge & Cox reported having sole voting
power over 149,860,360 shares, shared voting power over no shares, sole dispositive power over
156,597,738 shares and shared dispositive power over no shares. The securities reported on the
Schedule 13G are beneficially owned by clients of Dodge & Cox, which clients may include
investment companies registered under the Investment Company Act of 1940 and other
managed accounts, and which clients have the right to receive or the power to direct the
receipt of dividends from, and the proceeds from the sale of, HP’s stock. The Schedule 13G
contained information as of December 31, 2012 and may not reflect current holdings of HP’s
stock. The address of Dodge & Cox is 555 California Street, 40th Floor, San Francisco,
California 94104.
(2)
Based on the most recently available Schedule 13G filed with the SEC on February 6, 2013 by
BlackRock, Inc. According to its Schedule 13G, BlackRock, Inc. reported having sole voting
and dispositive power over all shares beneficially owned. The Schedule 13G contained
information as of December 31, 2012 and may not reflect current holdings of HP’s stock. The
address for BlackRock, Inc. is 40 East 52nd Street, New York, New York 10022.
(3)
Based on the most recently available Schedule 13G filed with the SEC on February 11, 2013 by
State Street Corporation and certain of its subsidiaries (‘‘State Street’’). According to its
Schedule 13G, State Street reported having shared voting and dispositive power over all shares
beneficially owned. The Schedule 13G contained information as of December 31, 2012 and may
not reflect current holdings of HP’s stock. The address for State Street Corporation is State
Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
48
(4)
Includes 11,700 shares that Mr. Andreessen elected to defer receipt of until the termination of
his service as a member of the Board.
(5)
Includes 29,523 shares that Mr. Gupta has the right to acquire by exercise of stock options.
(6)
Includes 133,333 shares that Mr. Lane has the right to acquire by exercise of stock options.
(7)
Includes 4,274 shares held by Ms. Livermore in the HP 401(k) Plan, 90,844 shares that
Ms. Livermore holds indirectly through a trust with her spouse, and 540,000 shares that
Ms. Livermore has the right to acquire by exercise of stock options.
(8)
Includes 36,687 shares that Mr. Reiner has the right to acquire by exercise of stock options.
(9)
Includes 66 shares held by Ms. Whitman indirectly through a trust and 200,000 shares that
Ms. Whitman has the right to acquire by exercise of stock options.
(10)
Mr. Whitworth is a principal of Relational Investors LLC (‘‘RILLC’’). RILLC is the record
owner of 200 shares and sole general partner, or sole managing member of the general partner,
of Relational Investors Mid-Cap Fund I, L.P., Relational Investors Mid-Cap Fund II, L.P.,
Relational Fund Partners, L.P., Relational Coast Partners, L.P., RH Fund 1, L.P., Relational
Investors IX, L.P., Relational Investors, XV, L.P., Relational Investors XVI, L.P., Relational
Investors XX, L.P., Relational Investors XXIII, L.P. and Relational Co-Investment Fund I, L.P.
These limited partnerships own a total of 20,735,767 shares. An additional 9,100,736 shares are
held in accounts managed by RILLC. Mr. Whitworth disclaims beneficial ownership of these
securities except to the extent of his pecuniary interest therein.
(11)
Includes 306 shares held by Ms. Lesjak’s spouse, 41,357 shares held indirectly by Ms. Lesjak
with her spouse, and 135,000 shares that Ms. Lesjak has the right to acquire by exercise of
stock options.
(12)
Includes 30,000 shares that Mr. Veghte has the right to acquire by exercise of stock options.
(13)
Includes 65,000 shares that Mr. Weisler has the right to acquire by exercise of stock options.
(14)
Includes 55,918 shares held by Mr. Nefkens indirectly through a trust and 42,000 shares that
Mr. Nefkens has the right to acquire by exercise of stock options.
(15)
Includes 128,968 shares held by Mr. Bradley indirectly through a trust and 200,000 shares that
Mr. Bradley has the right to acquire by exercise of stock options.
(16)
Includes 1,304,919 shares that current executive officers and directors have the right to acquire.
49
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires our directors, executive officers and holders of
more than 10% of HP’s stock to file reports with the SEC regarding their ownership and changes in
ownership of our securities. Based upon our examination of the copies of Forms 3, 4, and 5, and
amendments thereto furnished to us and the written representations of our directors, executive officers
and 10% stockholders, we believe that, during fiscal 2013, our directors, executive officers and 10%
stockholders complied with all Section 16(a) filing requirements, except that, due to technical issues
with his filer codes that resulted in a delay, Mr. Reiner filed a late Form 4 on April 24, 2013 reflecting
his ownership of 5,780 RSUs that vested on April 20, 2013.
RELATED PERSON TRANSACTIONS POLICIES AND PROCEDURES
We have adopted a written policy for approval of transactions between us and our directors,
director nominees, executive officers, beneficial owners of more than 5% of HP’s stock, and their
respective immediate family members where the amount involved in the transaction exceeds or is
expected to exceed $100,000 in a single calendar year.
The policy provides that the NGSR Committee reviews certain transactions subject to the
policy and decides whether or not to approve or ratify those transactions. In doing so, the NGSR
Committee determines whether the transaction is in the best interests of HP. In making that
determination, the NGSR Committee takes into account, among other factors it deems appropriate:
• The extent of the related person’s interest in the transaction;
• Whether the transaction is on terms generally available to an unaffiliated third party under
the same or similar circumstances;
• The benefits to HP;
• The impact or potential impact on a director’s independence in the event the related party is
a director, an immediate family member of a director or an entity in which a director is a
partner, 10% stockholder or executive officer;
• The availability of other sources for comparable products or services; and
• The terms of the transaction.
The NGSR Committee has delegated authority to the chair of the NGSR Committee to
pre-approve or ratify transactions where the aggregate amount involved is expected to be less than
$1 million. A summary of any new transactions pre-approved by the chair is provided to the full NGSR
Committee for its review at each of the NGSR Committee’s regularly scheduled meetings.
The NGSR Committee has adopted standing pre-approvals under the policy for limited
transactions with related persons. Pre-approved transactions include:
1.
Compensation of executive officers that is excluded from reporting under SEC rules
where the HRC Committee approved (or recommended that the Board approve) such
compensation;
2.
Director compensation;
50
3.
Transactions with another company with a value that does not exceed the greater of
$1 million or 2% of the other company’s annual revenues, where the related person
has an interest only as an employee (other than executive officer), director or
beneficial holder of less than 10% of the other company’s shares;
4.
Contributions to a charity in an amount that does not exceed $1 million or 2% of the
charity’s annual receipts, where the related person has an interest only as an employee
(other than executive officer) or director; and
5.
Transactions where all stockholders receive proportional benefits.
A summary of new transactions covered by the standing pre-approvals described in
paragraphs 3 and 4 above is provided to the NGSR Committee for its review in connection with that
committee’s regularly scheduled meetings.
Fiscal 2013 Related Person Transactions
We enter into commercial transactions with many entities for which our executive officers or
directors serve as directors and/or executive officers in the ordinary course of our business. All of those
transactions were pre-approved transactions as defined above except for transactions with Booz &
Company and McKesson Corporation, which were ratified by the NGSR Committee. Director Shumeet
Banerji served as a Senior Partner of Booz & Company and former director John H. Hammergren
served as Chairman and Chief Executive Officer of McKesson Corporation during fiscal 2013.
HP considers these transactions to have been at arm’s-length and does not believe that either
Mr. Banerji or Mr. Hammergren had a material direct or indirect interest in any of such commercial
transactions.
51
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis contains a detailed description of our executive
compensation philosophy and programs, the compensation decisions the HRC Committee has made
under those programs, and the considerations in making those decisions. This Compensation Discussion
and Analysis focuses on the compensation of our named executive officers (‘‘NEOs’’) for fiscal 2013,
who were:
• Margaret C. Whitman, President and CEO;
• Catherine A. Lesjak, Executive Vice President and Chief Financial Officer;
• William L. Veghte, Executive Vice President and General Manager, Enterprise Group;
• Dion J. Weisler, Executive Vice President, Printing and Personal Systems Group;
• Michael G. Nefkens, Executive Vice President, Enterprise Services; and
• R. Todd Bradley, former Executive Vice President, Printing and Personal Systems Group.
Executive Summary
Business Overview and Performance
HP is a leading global provider of products, technologies, software, solutions and services to
individual consumers, small- and medium-sized businesses, and large enterprises, including customers in
the government, health and education sectors. We offer one of the IT industry’s broadest portfolios of
products and services that brings together infrastructure, software, and services through innovation to
enable our customers to create value and solve business problems, and we are the leader or among the
leaders in most of the markets in which we compete. We also have a trusted brand that is supported by
a culture of innovation and strong connections with our customers, partners and employees.
We are organized around business segments, including Personal Systems, Printing, the
Enterprise Group, Enterprise Services, Software, HP Financial Services and Corporate Investments.
In fiscal 2012, we launched a five-year turnaround plan. The focus in fiscal 2012 was to
stabilize our business, identify and define key challenges, develop crisp business strategies, and
streamline and improve operations. Our focus in fiscal 2013 was to ‘‘fix and rebuild,’’ and our
continued efforts in fiscal 2013 resulted in the following strategic accomplishments:
• Implemented leadership and organizational changes that solidified an excellent leadership
team;
• Continued our multi-year restructuring program to streamline our company and create the
capacity to invest in innovation;
• Continued to invest in systems and tools that allowed us to better manage our business,
allocate resources and prioritize investment dollars; and
52
• Made significant improvements in our supply chain, inventories, business processes, and
go-to-market capabilities.
In addition to our significant strategic accomplishments, we delivered on several key financial
goals. However, overall, our financial progress continued to be mixed given the nature of our
turnaround plan and the disruptive changes taking place in our industry and in our business and a
challenging global macro-environment. Our fiscal 2013 annual incentive plan results included:
• $112.3 billion in Corporate Revenue (as defined on page 63), compared to a $117.9 billion
target;
• $7.8 billion in Corporate Net Earnings (as defined on page 63), compared to an $8.3 billion
target;
• 8.1% of revenue to Corporate Free Cash Flow (i.e., free cash flow margin) (as defined on
page 63), compared to a 6.3% target, allowing us to significantly reduce our debt, rebuild
our balance sheet, and return $2.6 billion to stockholders in the form of share repurchases
and dividends; and
• Total shareholder return of 81%.
We expect fiscal 2014 to be a year of ‘‘recovery and expansion.’’ While we will continue to
streamline our business, we also look forward to pursuing key growth opportunities for our businesses.
In addition, we expect to see certain investments start paying off.
Executive Compensation Philosophy
Our Board and the HRC Committee are committed to excellence in corporate governance and
to executive compensation programs that align the interests of our executives with those of our
stockholders. To fulfill this mission, we have a pay-for-performance philosophy that forms the
foundation for decisions regarding compensation. Our compensation programs have been structured to
balance near-term results with long-term success, enabling us to attract, retain, focus, and reward our
executive team for delivering stockholder value. The table below summarizes key elements of our fiscal
2013 compensation programs relative to this philosophy.
53
ALIGNMENT WITH STOCKHOLDERS
Pay-for-Performance
Corporate Governance
• The majority of target total direct compensation for
executives is performance-based as well as equity-based
• We generally do not enter into individual executive
compensation agreements
• Total direct compensation is targeted at the median
of our market
• We devote significant time to management succession
planning and leadership development efforts
• Actual total direct compensation and pay positioning
is designed to fluctuate with and be commensurate
with actual performance
• We maintain a market-aligned severance policy for
executives that does not have automatic single-trigger
equity vesting upon a change in control
• Incentive awards are heavily dependent upon our
performance against objective financial metrics which
we believe link either directly or indirectly to the
creation of value for our stockholders. In addition,
25% of our target annual bonus is contingent upon
the achievement of qualitative objectives that we
believe will contribute to our long-term success
• The HRC Committee utilizes an independent
compensation consultant
• We balance growth and return objectives, top and
bottom line objectives, and short- and long-term
objectives to reward for overall performance that
does not over-emphasize a singular focus
• Our compensation programs do not encourage
imprudent risk-taking
• A significant portion of our long-term incentives are
delivered in the form of performance-contingent stock
options (‘‘PCSOs’’), which vest only if sustained stock
price appreciation is achieved
• We disclose our performance goals and achievements
relative to these goals
• We provide no special or supplemental pension
benefits
• We conduct a robust stockholder outreach program
throughout the year
• We validate our pay-for-performance relationship on
an annual basis
54
Components of Compensation
Our primary focus in compensating executives is on the longer-term and performance-based
elements of compensation. The table below shows our pay components, along with the role and the
determination factors for each pay component.
Pay Component
Role
Determination Factors
Base Salary
• Fixed portion of annual cash
income
• Value of role in competitive
marketplace
• Value of role to the company
• Skills and performance of
individual compared to the
market as well as others in the
company
Annual Bonus
(i.e., Pay-for-Results Plan (‘‘PfR
Plan’’)
• Variable portion of annual cash
income
• Focus executives on annual
objectives that support the
long-term strategy and creation
of value
• Target awards based on
competitive marketplace and
level of executive
• Actual awards based on
performance against annual
corporate, business unit, and/or
individual goals
Long-Term Incentives
• PCSOs
• Restricted Stock Units (‘‘RSUs’’)
• Performance-Based Restricted
Units (‘‘PRUs’’)
• Other, as needed
• Reinforce need for long-term
sustained performance and
completion of turnaround
• Align interests of executives and
stockholders, reflecting the
time-horizon and risk to
investors
• Encourage equity ownership
• Encourage retention
• Target awards based on
competitive marketplace, level of
executive, and skills and
performance of executive
• Actual value relative to target
based on performance against
corporate goals and/or stock
price performance
Benefits/Perquisites/Severance
Protection
• Support the health and security
of our executives and their
ability to save on a tax-deferred
basis
•
•
•
•
55
Competitive marketplace
Level of executive
Standards of good governance
Desire to de-emphasize
Relationship Between CEO Pay and Performance
The HRC Committee regularly assesses the potential pay-for-performance relationships
inherent in our pay programs. The table below shows various definitions of pay that can be used in
conducting such an assessment:
Rationale/Pay Component
Target
Realized
• Recognizes that there
is no assurance that
this pay opportunity
will be earned until it
is actually earned
• Represents income
earned
Realizable
Rationale for use of
definition
• Represents intended
value of compensation
• Treats options and
other equity as though
it were currency
• Matches time horizon
of compensation with
performance
• Recognizes that
unexercised options
and unvested awards
have inherent potential
value
Salary
• Actual salary in fiscal year earned
Annual Bonus
• Target bonus for fiscal
year
• Actual bonus in fiscal year earned
PCSOs/Stock Options
• # of stock options
granted multiplied by
the Black-ScholesMerton value on grant
date
• # of stock options
exercised multiplied by
the intrinsic value at
time of exercise
• # of options
outstanding multiplied
by the Black-ScholesMerton value at end of
fiscal 2013 (including
PCSOs for which
performance goals have
been met and taking
into account the
in-the-money or
out-of-the money status
of the option and the
tail value)
RSUs
• # of RSUs granted
multiplied by the grant
date price
• # of RSUs vested
multiplied by the price
at the time of vesting
• # of RSUs outstanding
multiplied by the price
at end of fiscal 2013
PRUs
• # of target PRUs
granted multiplied by
the grant date fair
value
• # of PRUs vested
multiplied by the price
at the time of vesting
• # of PRUs outstanding
for which performance
goals have been met
multiplied by the price
at end of fiscal 2013
All Other
• Actual value of all other compensation as reported
The left-hand chart below shows Ms. Whitman’s average annual pay since she joined HP as our
CEO in September 2011 and is calculated as Target compensation, Realized compensation, and
56
Realizable compensation. The right-hand chart below shows Total Shareholder Return (‘‘TSR’’) from
the date of Ms. Whitman’s inception as CEO to the end of fiscal 2013 and TSR for fiscal 2013.
3-Year Average Total Compensation
By Pay Definition, FY11 - FY13 ($ millions)
$20
$18
Annualized Total Shareholder Return
From CEO Inception and for Fiscal 2013
90%
$17.7
(Target)
$16.1
(91% of Target)
$16
70%
$14
60%
$12
50%
$10
40%
$8
30%
$6
20%
10%
$4
$1.2
(7% of Target)
$2
Salary
All Other
Realized
Bonus (PfR)
PCSOs
24%
23%
6%
0%
From CEO Inception
Through Fiscal 2013
$0
Target
81%
80%
Realizable
RSUs PRUs
28JAN201422000290
S&P 500 Index
Stock Options
Fiscal 2013
28JAN201422000429
HPQ
The charts above demonstrate a robust relationship between CEO pay and performance since:
• The pay mix is highly variable (98%) and equity-oriented (88%);
• Our stock price over the recent year reflects our turnaround results;
• Average annual Realizable pay is reasonable relative to our performance. As of the end of
fiscal 2013, Realizable pay was 91% of the target value, including equity for which the
performance goals have been met; and
• The compensation package has considerable holding power since Realized compensation is
only 7% of target, indicating that a significant amount of granted compensation still needs to
vest through time and performance.
Oversight and Authority over Executive Compensation
Role of the HRC Committee and its Advisors
The HRC Committee oversees and provides strategic direction to management regarding all
aspects of our pay program for senior executives. It makes recommendations regarding the CEO’s
compensation to the independent members of the Board, and it reviews and approves the
compensation of the remaining Section 16 officers. Each HRC Committee member is an independent
non-employee director with significant experience in executive compensation matters. The HRC
Committee employs its own independent compensation consultant, as well as its own independent legal
counsel.
During fiscal 2013, the HRC Committee selected a new independent compensation consultant,
Farient Advisors LLC (‘‘Farient’’). The HRC Committee continued to retain Dentons US LLP
(‘‘Dentons’’) as its independent legal counsel. Farient provides analyses and recommendations that
inform the HRC Committee’s decisions, evaluates market pay data and competitive-position
benchmarking compiled by management’s consultants, provides analysis and input on performance
measures and goals, provides analysis and input on program structure, provides updates on market
trends and the regulatory environment as it relates to executive compensation, reviews various
57
management proposals presented to the HRC Committee related to executive compensation, and works
with the HRC Committee to validate and strengthen the pay-for-performance relationship and
alignment with stockholders. Pursuant to SEC rules the HRC Committee has assessed the
independence of Farient and Dentons, and concluded that no conflict of interest exists that would
prevent Farient or Dentons from independently representing the HRC Committee. Neither Farient nor
Dentons performs other services for HP, and neither will do so without the prior consent of the HRC
Committee chair. Both Dentons and Farient meet with the HRC Committee chair and the HRC
Committee outside the presence of management.
The HRC Committee met eight times in fiscal 2013, and six of these meetings included an
executive session. The HRC Committee’s independent advisors participated in most of the meetings
and, when requested by the HRC Committee chair, in the preparatory meetings and the executive
sessions.
Role of Management and the Chief Executive Officer in Setting Executive Compensation
On an annual basis, management considers market competitiveness, business results, experience
and individual performance in evaluating NEO compensation. The Executive Vice President, Human
Resources and other members of our human resources organization, together with members of our
finance organization and Office of the General Counsel, work with the CEO to design and develop
compensation programs, to recommend changes to existing plans and programs applicable to NEOs
and other senior executives, to recommend financial and other targets to be achieved under those
programs, to prepare analyses of financial data, peer comparisons and other briefing materials to assist
the HRC Committee in making its decisions, and, ultimately, to implement the decisions of the HRC
Committee. During fiscal 2013, management continued to engage Meridian Compensation
Partners, LLC (‘‘Meridian’’) as their compensation consultant. The HRC Committee considered that
Meridian provided executive compensation-related services to management when it evaluated the
information and analyses provided by Meridian.
During fiscal 2013, Ms. Whitman reviewed our fiscal 2013 compensation programs and
provided input to the HRC Committee regarding performance metrics and the setting of appropriate
performance targets. Ms. Whitman also recommended management business objectives (‘‘MBOs’’) for
the NEOs and the other senior executives who report directly to her. In addition, Ms. Whitman
provided input to the HRC Committee with respect to modifying the compensation programs for fiscal
2014 so as to promote the alignment of those programs with our strategic direction, as approved by the
Board. All modifications to the compensation programs were discussed and approved by the HRC
Committee. While Ms. Whitman is subject to the same financial performance goals as the executives
who lead global functions, Ms. Whitman’s MBOs and compensation are established by the HRC
Committee in executive session and recommended to the independent members of the Board for
approval; Ms. Whitman is not involved in the approval of her own performance goals or compensation.
Use of Comparative Compensation Data and Compensation Philosophy
Each year, the HRC Committee reviews the compensation of our Section 16 officers and
compares it to that of our peer group companies. The HRC Committee finds this information useful in
evaluating whether our pay practices are current and competitive. This process starts with the selection
of an appropriate group of peer companies for comparison purposes. The HRC Committee continues
to use a ‘‘rules-based’’ approach for determining our executive compensation peer group. Under this
approach, the peer group companies for fiscal 2013 were determined using five screening criteria:
• Current market capitalization greater than $25 billion;
58
• Revenue in excess of $30 billion for technology companies and $50 billion for companies in
other industries;
• In the S&P 500 Index, the Dow Jones 30 Index and/or the Dow Jones Global Titans Index;
• In industry-specific categories of information technology, industrials, materials,
telecommunications services, consumer discretionary and consumer staples; and
• Global scope and complexity commensurate with our business.
The revenue screen for technology companies was increased from $15 billion to $30 billion for
fiscal 2013 in order to more closely approximate our scale.
The HRC Committee believes that use of this methodology continues to produce an
appropriate peer group that is large and diverse enough so that the addition or elimination of any one
company does not alter the overall analysis.
As a result of the screening process we added two companies, Caterpillar Inc. and
PepsiCo, Inc., to the fiscal 2013 peer group. While EMC Corporation did not pass the revenue screen
for technology companies, the HRC Committee decided to retain EMC Corporation in the peer group
for relevance and consistency.
The peer group for fiscal 2013 consisted of the following companies:
Revenue
($ in billions)*
Company Name
Chevron Corporation . . . . . . . . . . . . . . . . . .
Apple Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
General Electric Company . . . . . . . . . . . . . .
Ford Motor Company . . . . . . . . . . . . . . . . .
AT&T Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
Verizon Communications Inc. . . . . . . . . . . .
Hewlett-Packard Company . . . . . . . . . . . . . .
International Business Machines Corporation
The Procter & Gamble Company . . . . . . . . .
The Boeing Company . . . . . . . . . . . . . . . . .
Microsoft Corporation . . . . . . . . . . . . . . . . .
Johnson & Johnson . . . . . . . . . . . . . . . . . . .
Caterpillar Inc. . . . . . . . . . . . . . . . . . . . . . .
PepsiCo, Inc. . . . . . . . . . . . . . . . . . . . . . . .
United Technologies Corporation . . . . . . . . .
Dell Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .
Intel Corporation . . . . . . . . . . . . . . . . . . . .
Google Inc. . . . . . . . . . . . . . . . . . . . . . . . .
Cisco Systems, Inc. . . . . . . . . . . . . . . . . . . .
Oracle Corporation . . . . . . . . . . . . . . . . . . .
EMC Corporation . . . . . . . . . . . . . . . . . . . .
*
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
241.91
170.91
144.80
134.25
127.43
115.85
112.30
104.51
84.17
81.70
77.85
67.22
65.88
65.49
57.71
56.94
53.34
50.18
48.61
37.18
21.71
Represents fiscal 2012 reported revenue, except fiscal 2013 reported revenue is
provided for Apple, Dell, Cisco Systems, Microsoft, Oracle, Procter & Gamble and
HP.
59
In reviewing comparative pay data from these companies against pay for our Section 16
officers, the HRC Committee evaluated some data using regression analysis to adjust size differences
between our company and the peer group companies. In addition, we excluded particular data points of
certain companies if they were anomalous and not representative of market practices.
As in fiscal 2012, in fiscal 2013 the HRC Committee set target compensation levels generally at
or near the market median (although in some cases higher for attraction and retention purposes).
Process for Setting and Awarding Executive Compensation
A broad range of facts and circumstances is considered in setting our overall executive
compensation levels. Among the factors considered for our executives generally, and for the NEOs in
particular, are market competitiveness, internal equity and individual performance. The weight given to
each factor may differ from year to year and may differ among individual NEOs in any given year. For
example, when we recruit externally, market competitiveness, experience and the circumstances unique
to a particular candidate may weigh more heavily in the compensation analysis. In contrast, when
determining year-over-year compensation for current NEOs, internal equity and individual performance
may factor more heavily in the analysis.
Because such a large percentage of NEO pay is performance-based, the HRC Committee
spends significant time determining the appropriate financial targets for our annual- and long-term
incentive pay plans. In general, management makes an initial recommendation for the financial targets,
which is then reviewed and discussed by the HRC Committee and its independent advisors. Major
factors considered in setting targets for each fiscal year are business results from the most recently
completed fiscal year, segment-level strategic plans, macroeconomic factors, competitive performance
results and goals, conditions or goals specific to a particular business segment and strategic initiatives.
To permit eligible compensation to qualify as ‘‘performance-based compensation’’ under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), the HRC Committee sets the overall
funding target for the ‘‘umbrella’’ structure for the annual bonuses, and sets performance goals for
equity awards within the first 90 days of the fiscal year.
Following the close of the fiscal year, the HRC Committee reviews actual financial and MBO
results against the targets set by the HRC Committee under our incentive compensation plans for that
year, with payouts under the plans generally determined by reference to performance against the
established targets. The HRC Committee meets in executive session to review the MBO results for the
CEO and to determine a recommendation for her annual cash incentive award to be approved by the
independent members of the Board.
In setting incentive compensation for the NEOs, the HRC Committee generally does not
consider the effect of past changes in stock price or expected payouts or earnings under other plans. In
addition, incentive compensation decisions are made without regard to length of service or prior
awards. For example, NEOs with longer service at HP or who are eligible for retirement do not receive
greater or lesser awards, or larger or smaller target amounts, in a given year compared to NEOs with
shorter service or who are not eligible for retirement.
Determination of Fiscal 2013 Executive Compensation
Under our Total Rewards Program, executive compensation consists of the following elements:
base salary, annual incentive pay, long-term incentive pay, benefits and perquisites.
60
Base Salary
Consistent with our philosophy of tying pay to performance, our executives receive a relatively
small percentage of their overall compensation in the form of base salary. Consistent with the practice
of our peer group companies, the NEOs are paid an amount in the form of base salary sufficient to
attract qualified executive talent and maintain a stable management team. The HRC Committee aims
to have executive base salaries set at or near the market median for comparable positions and comprise
10% to 20% of the NEOs’ overall compensation, consistent with the practice of our peer group
companies.
The HRC Committee usually establishes executive base salaries at the beginning of the fiscal
year. In November 2012, based on their performance and anticipated future contributions, and
considering the market data, the HRC Committee increased Ms. Lesjak’s, Mr. Veghte’s, and
Mr. Bradley’s salaries from $825,000 to $835,000, from $750,000 to $850,000, and from $850,000 to
$935,000, respectively, which brought their base salaries closer to the median base salary of the peer
group for their positions. In addition, the HRC Committee approved the following increases in
recognition of increased position responsibilities and market pay levels: from $600,000 to $700,000 for
Mr. Nefkens upon his promotion to Executive Vice President, Enterprise Services on December 1,
2012; from $565,121 to $775,000 for Mr. Weisler upon his promotion to Executive Vice President,
Printing and Personal Systems Group on June 18, 2013; and from $850,000 to $935,000 for Mr. Veghte
upon his becoming Executive Vice President, the Enterprise Group on August 21, 2013. Ms. Whitman’s
salary remained at $1 for fiscal 2013.
Annual Incentive Pay
Pay-for-Results (PfR) Plan Structure
The NEOs are eligible to receive annual incentive pay under the PfR Plan. For fiscal 2013, the
HRC Committee again established an ‘‘umbrella’’ formula for the maximum bonus and then exercised
negative discretion in setting actual bonuses. Under the umbrella formula, each Section 16 Officer was
allocated a maximum bonus of 350% of target bonus, subject to the maximum $10 million cap under
the PfR Plan, with a potential pro rata reduction if the allocated bonus amounts exceeded the overall
funding limit. The financial metric used to determine overall funding limit for the PfR Plan for
Section 16 officers for purposes of Section 162(m) of the Code was 0.75% of net earnings, increased
from 0.5% of net earnings in fiscal 2012. The increase in the funding limit was made to permit the
maximum annual incentives for each of the NEOs to be eligible to qualify as performance-based
compensation under Section 162(m) of the Code, in light of the increased potential awards for fiscal
2013 due to the addition of the Return on Invested Capital (‘‘ROIC’’) performance goal. Below this
umbrella funding structure, actual payouts were determined based upon financial metrics and MBOs
established by the HRC Committee for Section 16 officers who report to the CEO and by the
independent members of the Board for the CEO.
For fiscal 2013, the funding metric used to determine deductibility under Section 162(m) of the
Code was approved, as required, within the first 90 days of the fiscal year.
The target awards for the CEO and other NEOs for fiscal 2013 were set at $3 million for the
CEO and 125% of salary for the other NEOs. The HRC Committee imputed a competitive salary of
$1.5 million and competitive bonus target of 200% of salary to set the CEO PfR target award level.
Consistent with our intention to focus business leaders more directly on the financial
performance of their own businesses, the incentive structure for fiscal 2013 under the PfR Plan was
revised to include new metrics and weightings. For fiscal 2013, the performance metrics approved by
61
the HRC Committee consisted of three core financial metrics (i.e., revenue, net profit, and free cash
flow as a percentage of revenue) and MBOs, with each metric weighted equally at 25% of the target
award value.
For fiscal 2013, the HRC Committee also approved an additional incentive opportunity for
performance with respect to ROIC improvement and TSR. ROIC improvement had to be achieved
above the stretch target for any additional payout to occur. This additional incentive opportunity could
increase the annual cash incentive by 20% to 40%, resulting in a total maximum opportunity of 350%
of target bonus and with any incremental amount to be paid one year later to enable retention of
participating executives. TSR had to exceed the median of the S&P 500 for any payment above 250%
of target bonus. The TSR requirement was implemented in response to stockholder outreach meetings
and proxy advisors regarding the desire for a relative performance metric. The HRC Committee
believed that the additional incentive opportunity and resulting total annual cash incentive opportunity
was appropriate in light of the significant challenges being faced by HP, as well as the difficulty of
achieving or exceeding the performance goals.
The 2013 incentive plan structure is shown in the chart below:
Key Design
Elements
Weight:
Linkage:
Global Function Executives
BU Executives
Corporate Performance Goals:
Maximum
Target
Threshold
Fiscal 2013 Annual Incentive Plan
Corporate or Business Unit (‘‘BU’’) Goals
Free Cash
Revenue(1)
Net Profit
Flow as a %
(In billions) (In billions)
of Revenue
MBOs
25%
25%
25%
25%
Corporate
BU
Corporate
BU
Corporate
Corporate
Individual
Individual
—
$117.9
—
—
$8.3
—
—
6.3%
—
Various
Various
Various
% Payout(2)
250%
100%
0%
(1)
For revenue above target, weight is moved to net profit if net profit is also above target, or is
capped at target.
(2)
Interpolate for performance between discrete points.
The specific metrics, their linkage to corporate/business unit results, and the weighting that was
placed on each were chosen because the HRC Committee believed that:
• Performance against these metrics, in combination, would link to enhanced value for
stockholders, capturing both the top and bottom line, as well as cash and capital efficiency;
• Requiring both revenue and profitability above target in order to achieve an above-target
payout on these two measures would encourage the pursuit of profitable revenue;
• A linkage to business unit results for business unit executives would help drive accountability;
• A balanced weighting would limit the likelihood of rewarding executives for excessive
risk-taking;
62
• A balance of measures would avoid paying for the same performance twice;
• MBOs would enhance focus on business objectives, such as operational objectives, strategic
initiatives, succession planning, and people development, that will be important to the
long-term success of the company; and
• The additional incentive opportunity for ROIC and TSR performance would reinforce the
prudent use of capital at stretch levels on behalf of stockholders.
The definition of and rationale for each of the financial performance metrics that was used is
described in greater detail below:
Fiscal 2013 PfR Financial Metrics Definitions and Rationale
Fiscal 2013 Financial
Performance Metrics(1)
Definition
Rationale for Metric
Corporate Revenue
Net revenue as reported in HP’s Annual Report on
Form 10-K for fiscal 2013
Reflects top line performance,
which we believe is a strong
indicator of our long-term ability
to drive stockholder value
Business Revenue(2)
Business reported net revenue as reported in HP’s
Annual Report on Form 10-K for fiscal 2013
Corporate Net Earnings
Non-GAAP net earnings, as reported in HP’s fourth
quarter fiscal 2013 earnings press release, excluding
bonus target, net of income tax(3)
Business Net Profit (‘‘BNP’’)(2)
Business owned operating profit less corporate
marketing expense allocation plus bonus target net
of income tax
Corporate Free Cash Flow
Cash flow from operations less net capital
expenditures (gross purchases less retirements)
divided by net revenue (expressed as a percentage of
revenue)
Reflects efficiency of cash
management practices, including
working capital and capital
expenditures
Corporate ROIC
Non-GAAP net earnings, as reported in HP’s fourth
quarter fiscal 2013 earnings press release, divided by
average invested capital (total assets minus total
liabilities plus total debt plus impairments)
Reflects efficiency in allocating
capital to generate improved
returns for the business
Reflects bottom line financial
performance, which we believe is
most directly tied to stockholder
value on a short-term basis
(1)
While we report our financial results in accordance with GAAP, our financial performance
targets under our incentive plans are sometimes based on non-GAAP financial measures.
These non-GAAP financial measures may be further adjusted as permitted by those plans and
approved by the HRC Committee. These metrics and the related performance targets are
relevant only to our executive compensation program and should not be used or applied in
other contexts.
(2)
For fiscal 2013, PfR Plan payments for Mr. Weisler, Mr. Nefkens, and Mr. Bradley were
determined partly based on the Business Revenue and BNP for their respective business units,
and partly on Corporate Free Cash Flow. Mr. Veghte’s PfR Plan payment was determined
based on corporate financial metrics because he served as our Chief Operating Officer until
August 21, 2013.
(3)
Fiscal year 2013 non-GAAP net earnings of $6.9 billion excludes after-tax costs of $1.8 billion
related to the amortization of intangible assets, restructuring charges, and acquisition-related
charges. HP’s management uses non-GAAP net earnings to evaluate and forecast HP’s
performance before gains, losses, or other charges that are considered by HP’s management to
be outside of HP’s core business segment operating results. HP believes that presenting
non-GAAP net earnings provides investors with greater visibility to the information used by
63
HP’s management in its financial and operational decision making. HP further believes that
providing this additional non-GAAP information helps investors understand HP’s operating
performance and evaluate the efficacy of the methodology and information used by
management to evaluate and measure such performance. This additional non-GAAP
information is not intended to be considered in isolation or as a substitute for GAAP diluted
net earnings.
At its November 2013 meeting, the HRC Committee reviewed and certified performance
against the financial metrics as follows:
Metric
Fiscal 2013 PfR Plan Performance Against Financial Metrics(1)
Corporate
Target
Result
Weight(2)
($ billion)
($ billion)
Annual Cash
Incentive Payout
Corporate Revenue
25.0%
$117.9
$112.3
19.6%
Corporate Net
Earnings
25.0%
$8.3
$7.8
20.1%
Corporate Free Cash
Flow (% of revenue)
25.0%
6.3%
8.1%
62.5%
75.0%
—
—
102.3%
Total
(1)
Ms. Whitman, Ms. Lesjak, and Mr. Veghte received PfR Plan payments based on corporate
financial metrics. Mr. Weisler’s PfR Plan payment was guaranteed at target upon his promotion
to EVP, Printing and Personal Systems Group, on June 18, 2013. Mr. Nefkens received a PfR
Plan payment based on Enterprise Services Business Revenue and BNP, and Corporate Free
Cash Flow. Mr. Bradley received a prorated payment based on Printing and Personal Systems
Group’s Business Revenue and BNP, and Corporate Free Cash Flow for three quarters, and
based on corporate financial metrics only for one quarter of fiscal 2013.
(2)
The financial metrics were equally weighted to account for 75% of the target annual cash
incentive.
With respect to the ROIC improvement incentive award, the HRC Committee certified that
the ROIC improvement was below the stretch goal, which led to a ROIC award adjustment of 0%.
With respect to performance against the MBOs, the independent members of the Board
evaluated the CEO’s performance during an executive session held in December 2013. The evaluation
included an analysis of Ms. Whitman’s performance against all of her MBOs, which included, but were
not limited to: continuing to execute the turnaround plan; achieving cost reduction and optimization
program objectives; making the new operating model work and implementing operational scorecards;
further refining our strategy and vision, and improving strategy and planning processes and execution;
shifting the CEO’s focus from internal to external; advancing our capabilities in cloud, security, big data
and mobility; optimizing HP Labs; and improving employee engagement with special focus on vice
presidents. After conducting a thorough review of Ms. Whitman’s performance, the independent
members of the Board determined that Ms. Whitman’s MBO performance had been achieved above
target. Ms. Whitman’s accomplishments included:
• Significantly advancing our turnaround, including generating over $2 billion of labor savings
in fiscal 2013;
• Implementing improved operational processes and scorecards;
• Bringing our new strategy to life for customers, partners, employees, and investors;
64
• Creating effective business unit strategies and plans;
• Meeting with approximately 1,000 customers and partners and improving their engagement
with HP;
• Improving leadership and performance of HP Labs; and
• Executing a comprehensive leadership engagement program and significantly improving
employee engagement scores across HP in a difficult business environment, including
engagement scores for vice presidents.
The CEO evaluated the performance of each of the other Section 16 officers and presented
the results of those evaluations to the HRC Committee at its November 2013 meeting. The HRC
Committee concurred in the CEO’s assessment of the degree of attainment of the MBOs of the other
Section 16 officers. The evaluations included an analysis of the officers’ performance against all of their
MBOs. The results of these evaluations and selected MBOs for the other NEOs are summarized below.
Ms. Lesjak. The HRC Committee determined that Ms. Lesjak’s MBO performance had been
achieved above target. Her MBOs included, but were not limited to: achieving cost reduction and
optimization program objectives; improving the finance organization’s operating model; strengthening
investor relations; effectively implementing business and finance scorecards and our overall financial
strategy; delivering on succession and talent development plans; and improving employee engagement
scores.
Mr. Veghte. The HRC Committee determined that Mr. Veghte’s MBO performance had been
achieved at target for both of his roles in fiscal 2013—as Chief Operating and Strategy officer for HP
and as head of the Enterprise Group. His MBOs included, but were not limited to: helping refine and
communicate our strategy to customers, partners, and employees; delivering clear cloud and
go-to-market strategies; improving the strategy organization’s operating model; effectively implementing
scorecards; and delivering on the Enterprise Group’s financial plan.
Mr. Weisler. The HRC Committee determined that Mr. Weisler’s MBO performance had been
achieved above target. His MBOs included, but were not limited to: achieving cost reduction and
optimization program objectives; conducting a comprehensive assessment of the Printing and Personal
Systems Group and executing improvements; delivering a high-quality Printing and Personal Systems
Group business plan and budget for fiscal 2014; improving customer, partner, and employee
communications; and completing meaningful talent evaluation, development, and succession plans.
Mr. Nefkens. The HRC Committee determined that Mr. Nefkens’ MBO performance had
been achieved significantly above target. His MBOs included, but were not limited to: improving
profitability on key accounts; achieving cost reduction and optimization program and Lean (Six Sigma)
objectives; building a strong leadership team; improving customer satisfaction; and increasing employee
engagement scores.
Mr. Bradley. Mr. Bradley changed roles in fiscal 2013 and the HRC Committee agreed with
the CEO’s recommendation that he not receive an annual incentive award on MBO performance.
65
Based on the findings of these performance evaluations, the HRC Committee (and, in the case
of the CEO, the independent members of the Board) certified performance against the non-financial
metrics for the NEOs as follows:
Fiscal 2013 PfR Plan Performance Against Non-Financial Metrics (MBOs)
Actual Performance
as a Percentage
of Target
Annual Cash
Named Executive
Performance
Weight(1)
Incentive
Officer
(%)
(%)
(%)
Margaret C. Whitman
120
25
30.0
Catherine A. Lesjak
120
25
30.0
William L. Veghte
100
25
25.0
Dion J. Weisler
120
25
30.0
Michael G. Nefkens
150
25
37.5
—
25
—
R. Todd Bradley
(1)
Performance against non-financial metrics is weighted to account for 25% of the target annual
cash incentive.
Based on the level of performance described above on both the financial and non-financial
metrics for fiscal 2013, the payouts to the NEOs under the PfR Plan were as follows:
Named Executive
Officer
Fiscal 2013 PfR Plan Annual Cash Incentive Payout
Percentage of Target Annual Cash
Incentive Funded
Final Annual Cash Incentive Payout
As % of
Financial
Non-Financial
Target Annual
Metrics
Metrics
Cash Incentive
Payout
(%)
(%)
(%)
($)
Margaret C. Whitman
102.3
30.0
132.3
3,970,000*
Catherine A. Lesjak
102.3
30.0
132.3
1,380,469
William L. Veghte
102.3
25.0
127.3
1,378,773
Dion J. Weisler
75.0
30.0
105.0
697,380
Michael G. Nefkens
111.5
37.5
149.0
1,288,668
72.4
0.0
72.4
846,662
R. Todd Bradley
*
Based on the previously established fiscal 2013 financial metrics and MBOs under the PfR
Plan, the independent directors of the Board determined that Ms. Whitman’s bonus for fiscal
2013 was approximately $3,970,000, or 132.3% of target, reflecting outstanding performance for
the year. This reflected the Board’s approval of Ms. Whitman’s performance on behalf of HP,
and the members’ assessment that her performance in fiscal 2013 was above target. In 2013,
the HRC established a target compensation level for Ms. Whitman of $16.4 million aligned
with the market median. This amount included a long-term incentive (‘‘LTI’’) award of
$13.4 million and target cash incentive of $3 million. Due to timing delays with the grant that
were necessary to accommodate stock plan share limits and the associated stock price changes
of those delays, and higher-than-planned financial valuations of the grant, the aggregate grant
66
date fair value of the LTI award was $17.11 million or $3.71 million higher than the established
target LTI. Accordingly, the independent directors determined it was in the best interest of HP
and its stockholders to offset this higher LTI valuation through the cash bonus of $3,970,000
otherwise payable to Ms. Whitman under the PfR Plan, resulting in Ms. Whitman receiving
$3,710,000 of her $3,970,000 bonus through LTI value, and $260,000 in cash payment. This is
reflected in the Summary Compensation Table.
Fiscal 2013 Long-Term Incentive Compensation
At the beginning of fiscal 2013, the HRC Committee established a total long-term incentive
target value for each NEO, except for Mr. Weisler. Of that amount, 70% was awarded in the form of
PCSOs and 30% was awarded in the form of time-based RSUs. The high proportion of performancebased awards reflects our primary emphasis on performance-driven compensation. The time-based
awards facilitate retention, which is also an important goal of our executive compensation program.
Because Mr. Weisler was a senior vice president in November 2013, 50% of his LTI award was awarded
in the form of performance-based awards and 50% was awarded in the form of time-based RSUs,
consistent with other senior vice presidents.
2013 Performance-Contingent Stock Options
The 2013 PCSO award has an eight-year term and vests upon two conditions being met: (1) a
stock price appreciation condition; and (2) a continued service condition. Specifically, 50% of the
PCSO award vesting is contingent upon our stock price increasing by at least 20% over the grant date
stock price for at least 20 consecutive trading days within four years from the date of grant and the
recipient’s service to HP continuing for at least two years from the date of grant. The remaining 50%
of the PCSO award vesting is contingent upon our stock price increasing by at least 40% over the grant
date stock price for at least 20 consecutive trading days within four years from the date of grant and
the recipient’s service to HP continuing for at least three years from the date of grant.
In establishing the stock price appreciation conditions, the HRC Committee believed that
having the stock price remain at or above those levels for at least 20 consecutive trading days would be
indicative of a sustained increase in value to stockholders. In addition, the HRC Committee believed
that setting the stock price appreciation levels at 20% and 40% represents a significant ‘‘stretch’’
achievement, particularly considering the impact of our dividend yield, generating a reasonable return
to stockholders. As of the end of fiscal 2013, both performance conditions have been met on the fiscal
2013 PCSO awards. For additional information, please see ‘‘Executive Compensation—Grants of
Plan-Based Awards in Fiscal 2013.’’
2013 Restricted Stock Units
The 2013 RSU award vests ratably on an annual basis over three years. Three year vesting is
common in our industry and corresponds to the time frame of our turnaround efforts.
For more information on grants of RSUs to the NEOs during fiscal 2013, see ‘‘Executive
Compensation—Grants of Plan-Based Awards in Fiscal 2013.’’
Performance-Based Restricted Units Granted in Fiscal 2011 and 2012
No PRUs were granted in fiscal 2013; however, PRUs were granted in fiscal 2011 and 2012 for
which fiscal 2013 is part of the performance period. Each PRU award reflects a target number of
shares that may be issued to the award recipient at the end of each three-year performance period (i.e.,
fiscal 2011 to fiscal 2013, and fiscal 2012 to fiscal 2014). At the end of each fiscal year, the HRC
67
Committee certifies performance against the applicable performance targets, and units representing the
level of achievement during that fiscal year are ‘‘banked’’ for potential payout at the end of the
three-year performance period. The HRC Committee determines the actual number of shares the
recipient receives at the end of the three-year period based on results achieved versus performance
targets over the performance period. The actual number of shares a recipient receives ranges from zero
to two times the target number of shares depending on performance during the three-year period.
We used ‘‘cash flow from operations as a percentage of revenue’’ as a financial performance
metric for the PRUs granted in fiscal 2011 and 2012. Cash flow goals are set at the beginning of each
fiscal year in each plan cycle, and performance is reviewed at the end of each fiscal year. A percentage
of between zero and 200% is applied to one-third of a participant’s cash flow target award each year to
determine the number of units to be credited for that year based upon the extent to which the cash
flow performance goal was achieved. If we do not achieve a threshold level of cash flow performance
for the year, no units are credited for that year. The HRC Committee retained a one-year cash flow
performance period in fiscal 2012 because establishing suitable cash flow goals for a longer
performance period would have been difficult given the many uncertainties faced by our business.
The PRU awards granted in fiscal 2011 also included a relative TSR performance metric,
which required our total shareholder return relative to the S&P 500 over the three-year performance
period to be at least at the 25th percentile in order for there to be any payout. As a result, even if
annual cash flow goals were achieved or exceeded in each of the three years of the performance
period, there would be no payouts if our total stockholder return was in the bottom quartile of the
S&P 500 companies over the performance period. HP’s TSR performance over the three-year
performance period applicable to the PRU awards granted in fiscal 2011 was below the 25th percentile,
which resulted in a TSR modifier of 0% for those awards. As a result, as shown in the table below,
even though units had been credited each year during the performance period based on cash flow
performance, no shares were released to any participant (including the four current NEOs who were
granted such awards) with respect to those awards.
The PRU awards granted in fiscal 2012 are not subject to a TSR modifier and therefore the
HRC Committee established revenue growth as a new performance metric for fiscal 2012 PRU awards,
given the connection between that metric and our long-term success. The HRC Committee also
weighted cash flow from operations as a percentage of revenue at 70% and revenue growth at 30% for
the fiscal 2012 PRU awards.
For PRU awards granted in fiscal 2012, recipients were credited with a weighted average of
115.0% attributable to fiscal 2013 performance. PRU awards granted in fiscal 2012 have a three-year
performance period and so the final number of units paid out in shares will depend on fiscal 2014
performance.
For PRU awards granted in fiscal 2011, recipients were each credited with 132.2% of the units
attributable to fiscal 2013 cash flow performance. However, due to TSR performance over the
three-year period, none of these awards vested, and all were cancelled.
68
The actual performance for outstanding PRU awards as of the end of fiscal 2013 is
summarized in the tables below:
Cash Flow From Operations as a Percentage of Revenue(1)
FY11 Award
FY11
FY12
FY13
FY14
Achievement
at 88.2%
Achievement
at 35.4%
Achievement
at 132.2%
N/A
—
Achievement
at 17.0%
Achievement
at 164.3%
—(2)
FY12 Award
Revenue Growth
FY13
FY14
TSR
Modifier
Award
Payout
N/A
N/A
N/A
0%
0%
Achievement
at 56.8%
Achievement
at 0.0%
—(2)
N/A
—(2)
FY12
(1)
While we report our financial results in accordance with U.S. GAAP, our financial performance
targets under our incentive plans are sometimes based on non-GAAP financial measures that
have been adjusted to exclude certain items. As a result of these adjustments, the financial
measures used for purposes of our incentive plans may differ from the financial measures
included in our financial statements for financial reporting purposes. In particular, when
assessing cash flow performance for purposes of the PRU program, the HRC Committee
evaluates if proposed specific and limited adjustments should be made for certain
predetermined items, such as asset write downs, litigation claims or settlements, the effect of
changes in tax laws or accounting principles or other similar types of extraordinary events, as
permitted under the Second Amended and Restated Hewlett-Packard Company 2004 Stock
Incentive Plan (the ‘‘2004 Plan’’). For fiscal 2012 and fiscal 2013, cash flow from operations as
a percentage of revenue was calculated using adjusted non-GAAP cash flow from operations
and GAAP net revenue. Fiscal 2012 and fiscal 2013 adjusted non-GAAP cash flow from
operations reflected net reductions of $1.1 billion and $0.7 billion, respectively, to cash flow
from operations calculated on a GAAP basis relating to certain tax payments, the impact of
lower than budgeted capital lease activity, and payments made under restructuring plans.
(2)
To be determined.
Special Incremental Performance-Based Unit Awards
At its July 2010 meeting, the HRC Committee approved awards of special incremental
performance-based restricted units (‘‘SIPRUs’’) for certain executives, including Ms. Lesjak and
Mr. Bradley. Under the terms of the SIPRU awards, 40% of the units would have been earned if we
met our annual earnings per share (‘‘EPS’’) goals for each year in the two-year period covering fiscal
2011 and fiscal 2012 (‘‘Segment 1’’), and if our TSR performance for the same period had been at or
above the 50th percentile; the remaining 60% of the units would have been earned if we had met the
EPS goal for fiscal 2013, and our TSR had been above the 50th percentile at the end of the entire
three-year period of the award (‘‘Segment 2’’). Any units ‘‘banked’’ due to EPS performance during
Segment 1 or Segment 2 would have been cancelled if TSR performance was below the 50th percentile
of the S&P 500 for the 24- or 36-month period, respectively. However, units could have been earned
based on TSR performance during a period even if no units were earned or ‘‘banked’’ based on EPS
performance during that segment.
At its November 2013 meeting, the HRC Committee reviewed our actual EPS for fiscal 2013
and determined that performance was below threshold. In addition, the HRC Committee reviewed our
TSR performance through the three-year period and determined it was below the 50th percentile of the
S&P 500. As a result, no units were banked or earned under this program.
69
Special Retention Restricted Stock Unit Awards
In June 2011, the HRC Committee granted special retention awards of restricted stock units
(‘‘SRRSUs’’) to key members of the executive team, including Ms. Lesjak and Mr. Bradley, upon the
recommendation of the then-current CEO. The awards were intended to provide both performance and
retention incentives and will vest after four years with accelerated vesting possible in years three and
four upon the attainment of certain stock price increases, which have not been achieved to date.
Salary Increases, Bonus Target Increases, and Special Performance-equity Grants in Connection with Role
Changes for select NEOs
Messrs. Nefkens, Veghte and Weisler assumed new EVP roles during fiscal 2013. Each received
a salary increase upon assuming his new role, and Messrs. Nefkens and Weisler each received an
increase in their annual incentive target opportunity to 125% of eligible earnings, which is consistent
with other EVPs. Mr. Nefkens received a regular, annual equity award upon his promotion in
December 2012. In recognition of their assuming new and increased roles and responsibilities,
Messrs. Veghte and Weisler received the following one-time, special equity awards:
Grant Date
William L. Veghte . . . . . . . . . . . . . . . . . . . . . . . . .
Dion J. Weisler . . . . . . . . . . . . . . . . . . . . . . . . . . .
9/18/2013
8/1/2013
Grant Date Fair Value
RSU
PCSO
$1,800,019
$1,050,013
$5,020,367
$3,060,050
Total
$6,820,386
$4,110,063
Except for Mr. Veghte’s PCSO award, the special equity awards include the same service and
stock price appreciation conditions as described above for fiscal 2013 annual equity grants. Mr. Veghte’s
special PCSO award is divided into three equal tranches that must meet certain conditions to vest. For
Mr. Veghte’s special PCSO award to vest, both a stock price appreciation condition and a continued
service condition must be satisfied. For the first third of his special PCSO award to vest, our stock
price must increase by at least 20% over the grant date stock price for at least 20 consecutive trading
days within four years from the date of grant and Mr. Veghte’s service must continue for at least one
year from the date of grant. For the second third of his award to vest, our stock price must increase by
at least 20% over the grant date stock price for at least 20 consecutive trading days within four years
from the date of grant and Mr. Veghte’s service must continue for at least two years from the date of
grant. For the remaining third of his award to vest, our stock price must increase by at least 40% over
the grant date stock price for at least 20 consecutive trading days within four years from the date of
grant and Mr. Veghte’s service must continue for at least three years from the date of grant. If the
stock price appreciation conditions have not been met by the fourth anniversary of the grant date, the
options will be forfeited.
The HRC Committee determined that the value of these one-time, special awards should be
considered to be spread out over their three-year vesting period, and to be considered part of fiscal
2014, 2015 and 2016 pay.
In addition, Mr. Veghte received a special three-year incentive opportunity linked to the
profitability performance of the Enterprise Group over fiscal 2014, 2015 and 2016. Similar to
Mr. Veghte’s special PCSO award described above, the HRC Committee determined that the value of
this special three-year bonus should be considered to be spread out over the three-year performance
period, and to be considered part of fiscal 2014, 2015 and 2016 pay.
The special equity award and three-year incentive opportunity for Mr. Veghte reflected not
only his new and increased role and responsibilities, and his critical role in the Enterprise Group, but
70
also reflected a one-time retention grant to counter an offer for a leadership role at an external
company.
Upon his promotion to EVP, and in support of our turnaround effort, Mr. Nefkens received a
special, one-time RSU award opportunity linked to the profitability of Enterprise Services in lieu of his
continued participation in a similar cash incentive program for senior vice presidents. Under the
program, Mr. Nefkens could receive an award if ES-owned operating profit (‘‘OOP’’) exceeded target,
with a maximum award of $2.625 million if OOP exceeded target by $300 million, with straight line
interpolation between target and maximum. At its November 2013 meeting, the HRC Committee
reviewed and approved an Enterprise Services’ OOP result of $49 million above target and a resulting
RSU award of $428,750 to be granted to Mr. Nefkens in December 2013. This RSU award will vest
50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date
subject to his continued employment.
Fiscal 2014 Compensation Programs
The Board and the HRC Committee regularly explore ways in which our executive
compensation program can be improved. We engage with our stockholders to elicit their feedback, and
we take this feedback very seriously. In 2013, 76% of shares voted were voted in favor of our
‘‘say-on-pay’’ proposal. In response to this vote, we had numerous discussions with institutional
investors to determine the key factors contributing to their vote and how we could improve the
program for 2014. In addition, in making changes for 2014 we considered the evolution of our
turnaround, the industry, and our current business needs in order to maintain a program that
encourages strong performance from our executives, pays commensurately with the performance
delivered, and aligns their interests with those of our stockholders. While many elements of the 2013
executive compensation program will remain in 2014, changes for fiscal 2014 include:
• CEO Compensation. When she joined HP as CEO, the Board established an initial salary
for Ms. Whitman of $1 per year, reflecting the company’s turnaround. Since we expect fiscal
2014 to be a ‘‘recovery and expansion’’ year, the Board decided it would be appropriate to
begin paying Ms. Whitman a salary consistent with the median of our peer group. As a
result, for fiscal 2014, Ms. Whitman will receive a salary of $1.5 million. The rest of her
compensation was rebalanced with a reduction in LTI grant date award value to maintain a
total package that approximates the competitive median of our market and is consistent with
our pay positioning strategy and pay-for-performance philosophy.
• Incentive Measures. In fiscal 2013, the HRC Committee added a Return on Invested
Capital (ROIC) and Relative TSR feature to the PfR Plan. The HRC Committee
determined that these measures could be better influenced over the longer term. As a result,
for fiscal 2014, we are eliminating the ROIC/TSR multiplier from the PfR Plan, and
therefore, the maximum annual cash incentive opportunity will be reduced from 350% to
250% of target. ROIC and relative TSR measures will be incorporated into our long-term
incentive plans (see below).
• Mix of Long-term Incentive Awards. LTI awards will continue to be 70% performancebased and 30% time-based. However, the mix of performance-based LTI awards will change
in fiscal 2014 from 70% to 40% in PCSOs, and from 0% to 30% in performance-adjusted
restricted stock units (‘‘PARSUs’’), which is a new vehicle under the 2004 Plan for fiscal
2014. The remaining 30% of the total LTI value will continue to be awarded as time-based
RSUs.
71
• Performance-Contingent Stock Options. The fiscal 2014 PCSO awards will vest in three
tranches versus two tranches in fiscal 2013. Specifically,
• one-third of the PCSO award will vest upon either (i) continued service of one year
and our closing stock price is at least 10% over the grant date stock price for at
least 20 consecutive trading days within two years from the date of grant, or
(ii) continued service for seven years and our TSR being at or above the
55th percentile relative to the S&P 500 in seven years from the date of grant;
• one-third will vest upon either (i) continued service for two years and our closing
stock price is at least 20% over the grant date stock price for at least 20 consecutive
trading days within three years from the date of grant, or (ii) continued service for
seven years and our TSR being at our above the 55th percentile relative to the
S&P 500 in seven years from the date of grant; and
• one-third will vest upon either (i) continued service of three years and our closing
stock price is at least 30% over the grant date stock price for at least 20 consecutive
trading days within four years from the date of grant, or (ii) continued serviced for
seven years and our TSR being at our above the 55th percentile relative to the
S&P 500 in seven years from the date of grant.
The HRC Committee determined that these changes would be appropriate based on an
analysis conducted by Farient that showed that the new structure will on average require
returns commensurate with the competitive environment as well as with the 2013 PCSO
requirements, and considering that a three-tranche vs. two-tranche format will encourage
more even stockholder value creation over time. Moreover, the HRC Committee determined
that the seven-year relative TSR measure is more appropriate for a long-term than a
short-term plan because it will encourage long-term value creation. The HRC Committee
also concluded that the PCSOs should be earned if we outperform the market over the
longer-term (i.e., seven years), coupled with the executive satisfying the seven-year service
requirement. If neither the stock price goals nor the TSR performance goal has been met by
the seventh anniversary of the grant date, the PCSOs will be forfeited.
• Performance-Adjusted Restricted Stock Unit. The PARSU is a new long-term incentive
compensation vehicle granted under the 2004 Plan that will be granted to all NEOs and
other executive officers. The initial PARSU grants made in fiscal 2014 will have a three-year
performance period commencing at the beginning of fiscal 2014 and ending at the end of
fiscal 2016. Under this program, 50% of the PARSUs will be eligible for vesting based on
performance over two years with continued service, and 50% of the PARSUs will be eligible
for vesting based on performance over three years with continued service. The awards
eligible for two-year vesting will be 50% contingent upon our two-year Relative TSR
(‘‘RTSR’’) and 50% contingent on our ROIC performance, and similarly, the awards eligible
72
for three-year vesting will be 50% contingent upon our three-year RTSR and 50% contingent
on our ROIC performance. This structure is depicted in the chart below.
2014-2016 PARSUs
ROIC vs. Internal Goals
Key Design Elements
Weights
(1)
Performance/Vesting Periods
Relative TSR vs. S&P 500
Payout
25%
25%
25%
25%
% of
2 years
3 years
2 years
3 years
Target(2)
Performance Levels:
Max
> Target
Target
Threshold
< Threshold
To be disclosed after the end of
the performance periods
> 90th percentile
70th percentile
50th percentile
25th percentile
< 25th percentile
200%
150%
100%
50%
0%
(1)
Performance measurement and vesting occur at the end of the two- and three-year periods
(2)
Interpolate for performance between discrete points
Internal ROIC goals were set after consideration of historical performance, internal budgets,
external expectations, and peer group performance.
The PARSUs were structured to vest 50% over two and 50% over three years because this
time horizon is consistent with our turnaround plan. Relative TSR was chosen as a performance
measure because it is a direct measure of stockholder value, and complements the absolute measure of
stock price growth inherent in the PCSOs. ROIC was chosen because it measures capital efficiency,
which is a key driver of stockholder value.
Benefits
We do not provide our executives, including the NEOs, with special or supplemental defined
benefit pension or health benefits. Our NEOs receive health and welfare benefits (including retiree
medical benefits, if eligibility conditions are met) under the same programs and subject to the same
eligibility requirements that apply to our employees generally.
Benefits under all U.S. pension plans were frozen effective December 31, 2007. As a result, no
NEO or any other HP employee accrued a benefit under any HP U.S. defined benefit pension plan
during fiscal 2013. The amounts reported as an increase in pension benefits are for those NEOs who
previously accrued a benefit in an HP pension plan prior to 2008, and reflect changes in actuarial
values only, not additional benefit accruals.
The NEOs, along with other HP executives who earn base pay or an annual cash incentive in
excess of certain federal tax law limits, are eligible to participate in the HP Executive Deferred
Compensation Plan (the ‘‘EDCP’’). This plan is maintained to permit executives to defer some of their
compensation in order to also defer taxation on such amounts. This is a standard benefit plan also
offered by most of our peer group companies. The EDCP permits deferral of base pay in excess of the
amount taken into account under the qualified HP 401(k) Plan ($255,000 in fiscal 2013) and up to 95%
of the annual cash incentive payable under the PfR Plan. In addition, we make a 4% matching
contribution to the plan on base pay contributions in excess of Internal Revenue Service (‘‘IRS’’) limits.
This is the same percentage as that which those executives are eligible to receive under the HP 401(k)
Plan. In effect, the EDCP permits these executives and all employees to receive a 401(k)-type matching
contribution on a portion of base-pay deferrals in excess of IRS limits. Amounts deferred or matched
under the EDCP are credited with investment earnings based on investment options selected by the
73
participant from among mutual and proprietary funds available to employees under the HP 401(k)
Plan. No amounts earn above-market returns.
Consistent with its practice of not providing any special or supplemental executive benefit
programs, including arrangements that would otherwise provide special benefits to the family of a
deceased executive, in 2011 the HRC Committee adopted a policy that, unless approved by our
stockholders pursuant to an advisory vote, we will not enter into a new plan, program or agreement or
modify an existing plan, program or agreement with a Section 16 officer that provides for payments,
grants or awards following the death of the officer in the form of unearned salary or unearned annual
cash incentives, accelerated vesting or the continuation in force of unvested equity grants, awards of
ungranted equity, perquisites, and other payments or awards made in lieu of compensation, except to
the extent that such payments, grants or awards are provided or made available to our employees
generally.
Perquisites
Consistent with the practices of many of our peer group companies, we provide a small number
of perquisites to our senior executives, including the NEOs, as discussed below.
We provide our NEOs with financial counseling services to assist them in obtaining professional
financial advice, which is a common benefit among our peer group companies.
Due to our global presence, we maintain a certain number of corporate aircraft. Personal use
of these aircraft by the CEO and some of her direct reports, including all of the NEOs, is permitted,
subject to availability. The CEO may use HP aircraft for personal purposes in her own discretion and,
at times, is advised to use HP aircraft for personal travel for security reasons. EC members may use
HP aircraft for personal purposes, if available and approved by the CEO. The CEO and EC members
are taxed on the value of this usage according to IRS rules. There is no tax gross-up paid on the
income attributable to this value. In fiscal 2012, Ms. Whitman entered into a ‘‘time-sharing agreement’’
with HP, under which she reimburses us for costs incurred in connection with certain personal travel on
corporate aircraft.
Following a global risk management review commissioned by the Audit Committee of the
Board, security systems were installed at the personal residences of some of our executives, including
the NEOs. These protections are provided due to the range of security issues that may be encountered
by key executives of any large, multinational corporation.
Severance Plan for Executive Officers
Our Section 16 officers (including all of the NEOs) are covered by the HP Severance Plan for
Executive Officers (the ‘‘SPEO’’), which is intended to protect HP and its stakeholders, and provide a
level of transition assistance in the event of an involuntary termination of employment. Under the
SPEO, participants who incur an involuntary termination, not for cause, and who execute a full release
of claims following such termination, which release has not been revoked or attempted to be revoked,
are eligible to receive severance benefits in an amount determined as a multiple of base pay and the
average of the actual annual cash incentives paid for the preceding three years. In the case of the
NEOs, the multiplier is 1.5. In the case of the CEO, the multiplier would have been 2.0 under the
terms of the SPEO, but Ms. Whitman elected to be eligible for the same multiplier as the other NEOs.
In all cases, this benefit will not exceed 2.99 times the sum of the executive’s base pay plus target
annual cash incentive as in effect immediately prior to the termination of employment.
74
Although the majority of compensation for our executives is performance-based and largely
contingent upon achievement of financial goals, the HRC Committee continues to believe that the
SPEO provides important protection to the Section 16 officers and is appropriate for the attraction and
retention of executive talent. In addition, we find it more equitable to offer severance benefits based on
a standard formula for the Section 16 officers because severance often serves as a bridge when
employment is involuntarily terminated, and should therefore not be affected by other, longer-term
accumulations. As a result, and consistent with the practice of our peer group companies, other
compensation decisions are not generally based on the existence of this severance protection.
In addition to the cash benefit, SPEO participants are eligible to receive (1) a pro-rata annual
cash incentive for the year of termination based on actual performance results, in the discretion of the
HRC Committee, (2) pro-rata vesting of unvested equity awards, if the executive has worked at least
25% of the applicable service vesting period and only if any applicable performance conditions have
been satisfied, and (3) for payment of a lump sum health benefit stipend of an amount equal to
18 months’ COBRA premiums for continued group medical coverage for the executive and his or her
eligible dependents, to the extent those premiums exceed the premiums for active employees in the
same plan with the same level of coverage for a period of 18 months.
Benefits in the Event of a Change in Control
We do not generally provide change in control benefits to our executive officers. While the
Board or the HRC Committee does have broad discretion to accelerate vesting of all stock and stock
option awards upon a change in control, accelerated vesting is not automatic. This approach allows the
Board or the HRC Committee to decide whether to vest equity after taking into consideration the facts
and circumstances of a given transaction. As a result, the NEOs could become fully vested in their
outstanding equity awards upon a change in control if the Board or the HRC Committee affirmatively
acts to accelerate vesting.
In addition, an involuntary termination of employment following a change in control of HP
could qualify as ‘‘involuntary termination, not for cause’’ within the meaning of the SPEO. This event
would trigger the same level of benefits as though the termination occurred absent a change in control.
In the fall of 2010, the HRC Committee entered into a letter agreement with Ms. Lesjak
relating to her employment with HP, which concluded on December 15, 2013. That letter agreement
included, among other things, certain protections for Ms. Lesjak in the event of a change in control of
HP during the three-year term of the agreement. The HRC Committee believed that including those
provisions was appropriate given the context of changes in our leadership at that time.
Employment Offer Letter for Margaret C. Whitman as President and CEO
The terms of the offer letter under which Ms. Whitman was elected President and CEO
provided for her to receive an initial base salary of $1 per year, a fiscal 2012 target annual cash
incentive under the PfR Plan of $2.4 million, with a maximum fiscal 2012 annual cash incentive
opportunity equal to 2.5 times target, subject to the satisfaction of the same performance conditions
applicable to other participants in the PfR Plan, and a grant of an option to purchase 1,900,000 shares
of our stock. The option vests in accordance with the vesting schedule and performance criteria
described below:
• 100,000 option shares will vest, if at all, on each of the first three anniversaries of the option
grant date, subject to Ms. Whitman’s continued employment (thus 66.67% of these option
shares have vested);
75
• 800,000 of the option shares will vest, if at all, upon the satisfaction of both of the following
criteria prior to the expiration of the eight-year term of the option: (i) Ms. Whitman’s
continued employment on the first anniversary of the option grant date; and (ii) subject to
Ms. Whitman’s continued employment on such date, the first date following the grant date
that the closing price of our stock on the NYSE has met or exceeded 120% of the exercise
price of the option for at least 20 consecutive trading days; and
• 800,000 of the option shares will vest, if at all, upon the satisfaction of both of the following
criteria prior to the expiration of the eight-year term of the option: (i) Ms. Whitman’s
continued employment on the second anniversary of the option grant date; and (ii) subject to
Ms. Whitman’s continued employment on such date, the first date following the grant date
that the closing price of our stock on the NYSE has met or exceeded 140% of the exercise
price of the option for at least 20 consecutive trading days.
The option is subject to substantially the same terms and conditions as apply to options
granted to other executives under the 2004 Plan except (i) if Ms. Whitman’s employment is
involuntarily terminated without cause by HP, then Ms. Whitman will forfeit all unvested shares subject
to performance- based vesting, receive pro-rata accelerated vesting of all unvested shares subject to
time-based vesting, and retain the right to exercise the option with respect to vested shares during the
one-year period following her termination (or until the original expiration date of the option, if earlier),
and (ii) any accelerated vesting of the option following Ms. Whitman’s death or disability will apply
only to shares subject to time-based vesting with any unvested shares subject to performance-based
vesting being forfeited. In addition, Ms. Whitman is entitled to receive severance benefits payable
under the SPEO at the rate applicable to an EVP rather than the rate applicable to the CEO (that is,
using a 1.5x multiple of base pay plus annual cash incentive, rather than the 2.0x multiplier otherwise
applicable to the CEO under the SPEO).
Other Compensation-Related Matters
Succession Planning
Among the HRC Committee’s responsibilities described in its charter is to oversee succession
planning and leadership development. The Board plans for succession of the CEO and annually reviews
senior management selection and succession planning that is undertaken by the HRC Committee. As
part of this process, the independent directors annually review the HRC Committee’s recommended
candidates for senior management positions to see that qualified candidates are available for all
positions and that development plans are being utilized to strengthen the skills and qualifications of the
candidates. The criteria used when assessing the qualifications of potential CEO successors include,
among others, strategic vision and leadership, operational excellence, financial management, executive
officer leadership development, ability to motivate employees, and an ability to develop an effective
working relationship with the Board. In fiscal 2013, the HRC Committee conducted a full executive
talent review of all EC members, focusing specifically on EC member succession plans with an
emphasis on CEO succession. In connection with that review, the HRC Committee identified three
potential successors to the CEO and created development plans for all three individuals.
In conjunction with the EC member talent review, management also reviewed potential
successors for the top 119 roles across HP. In connection with that review, we concluded that ‘‘ready
now’’ potential successors exist for approximately two-thirds of those roles, which represents an increase
in the level of readiness of our talent compared to previous years. We created development plans for
the potential successors who were identified as being ready in one to two years or three to five years.
We also continued tracking development plans for roles at the vice president level or above. In
addition, we expanded our executive talent review process to include all vice presidents and
76
director-level employees, as well as critical roles beyond the top 119 roles. By the end of fiscal 2013, we
had greater visibility into our talent pool down to the director level, and, in fiscal 2014, we will use that
data to build the succession plans for the next tier of critical roles.
Stock Ownership Guidelines
Our stock ownership guidelines are designed to increase executives’ equity stakes in HP and to
align executives’ interests more closely with those of stockholders. The current guidelines provide that,
within five years of assuming a designated position, the CEO should attain an investment position in
our stock equal to seven times her base salary and all other EVPs should attain an investment position
equal to five times their base salary. Since the CEO salary was initially set at $1, we have used an
imputed salary of $1.5 million, which is a competitive salary for a CEO in our peer group, to calculate
Ms. Whitman’s ownership requirement, thereby requiring her to hold shares with a value equal to at
least $10.5 million within five years of joining HP. Shares counted toward these guidelines include any
shares held by the executive directly or through a broker, shares held through the HP 401(k) Plan,
shares held as restricted stock, shares underlying time-vested RSUs, and shares underlying vested but
unexercised stock options (50% of the in-the-money value of such options is used for this calculation).
NEOs subject to this ownership guideline (that is, those who have been in a covered role for five or
more years) are in compliance with its requirements.
The HRC Committee has adopted a policy prohibiting our executive officers from engaging in
any form of hedging transaction (derivatives, equity swaps, forwards, etc.) including, among other
things, short sales, transaction involving publicly traded options. In addition, with limited exceptions,
our executive officers are prohibited from holding HP securities in margin accounts and from pledging
HP securities as collateral for loans. We believe that these policies further align our executives’
interests with those of our stockholders.
Accounting and Tax Effects
The impact of accounting treatment is considered in developing and implementing our
compensation programs, including the accounting treatment as it applies to amounts awarded or paid
to our executives.
The impact of federal tax laws on our compensation programs is also considered, including the
deductibility of compensation paid to the NEOs, as limited by Section 162(m) of the Code. Most of our
compensation programs are designed with the intention that compensation paid thereunder will be
eligible to qualify for deductibility under Section 162(m), but to preserve flexibility in administering
compensation programs, not all amounts paid under all of our compensation programs necessarily
qualify for deductibility.
Policy on Recovery of Annual Cash Incentive in Event of Financial Restatement
In fiscal 2006, the Board adopted a ‘‘clawback’’ policy that permits the Board to recover certain
annual cash incentives from senior executives whose fraud or misconduct resulted in a significant
restatement of financial results. The policy allows for the recovery of annual cash incentives paid at or
above target from those senior executives whose fraud or misconduct resulted in the restatement where
the annual cash incentives would have been lower absent the fraud or misconduct, to the extent
permitted by applicable law.
In addition, in fiscal 2013, we added a provision to our incentive plan document to allow for
the recoupment of annual cash incentive and long-term incentive awards consistent with applicable law
and the ‘‘clawback’’ policy.
77
HR and Compensation Committee Report on Executive Compensation
The HR and Compensation Committee of the Board of HP has reviewed and discussed with
management this Compensation Discussion and Analysis. Based on this review and discussion, it has
recommended to the Board that the Compensation Discussion and Analysis be included in this proxy
statement and in the Annual Report on Form 10-K of HP filed for the fiscal year ended October 31,
2013.
HR and Compensation Committee of the Board of Directors
Patricia F. Russo, Chair
Shumeet Banerji
James A. Skinner
Ralph V. Whitworth
78
Summary Compensation Table
The following table sets forth information concerning the compensation of our CEO, our chief
financial officer, our three other most highly compensated executive officers serving during fiscal 2013
and one HP employee who served as an executive officer during fiscal 2013, but who was no longer
serving as such on the last day of fiscal 2013.
Name and Principal
Position
Stock
Option
Salary(1) Bonus(2) Awards(3) Awards(4)
Year
($)
($)
($)
($)
Non-Equity
Incentive
Plan
Compensation(5)
($)
— 4,394,475 12,713,433
— 7,040,076 6,414,249
—
— 16,146,331
260,000(6)
1,686,915
—
— 1,500,002
— 2,478,698
— 9,310,408
4,460,404
2,308,503
—
William L. Veghte . . . . . . 2013 866,776 1,083,470 3,450,021
Executive Vice President
and General Manager,
Enterprise Group
Margaret C. Whitman . . . . 2013
President and Chief
2012
Executive Officer
2011
1
1
1
Change
in Pension
Value and
Nonqualified
Deferred
Compensation
All Other
Earnings(7) Compensation(8)
($)
($)
Total
($)
—
—
—
275,334
220,901
372,598
17,643,243
15,362,142
16,518,930
1,380,469
570,166
679,143
—
480,404
89,920
40,600
40,670
101,507
8,216,507
6,703,452
11,005,978
9,926,810
295,303
—
22,469
15,644,849
Dion J. Weisler . . . . . . . . 2013 647,478 2,302,598 1,603,213
Executive Vice President,
Printing and Personal
Systems Group
3,473,722
33,208
—
1,089,993
9,150,212
Michael G. Nefkens . . . . . 2013 691,693
Executive Vice President,
Enterprise Services
— 1,050,017
3,332,493
1,288,668
—
2,663,130
9,026,001
R. Todd Bradley(9) . . . . . . 2013 935,036
Former Executive Vice
2012 850,011
President, Printing and
2011 850,000
Personal Systems Group
— 1,875,002
— 2,974,443
— 9,271,624
5,575,504
2,770,206
—
846,662
640,569
464,457
235
251
273
66,281
127,125
105,447
9,298,720
7,362,605
10,691,801
Catherine A. Lesjak . . . . . 2013 835,032
Executive Vice President
2012 825,011
and Chief Financial Officer 2011 825,000
(1)
Amounts shown represent base salary earned or paid during the fiscal year, as described under
‘‘Compensation Discussion and Analysis—Analysis of Elements of Fiscal 2013 Executive
Compensation—Base Pay.’’ The fiscal 2013 salary amount for Mr. Weisler above reflects the
conversion of Mr. Weisler’s salary from Singaporean dollars to U.S. dollars using the currency
exchange rate in effect at the time of each payment to Mr. Weisler.
(2)
No discretionary bonuses were awarded to the NEOs by the HRC Committee for fiscal 2011 or
fiscal 2012. The fiscal 2013 bonus amount for Mr. Veghte represents a guaranteed portion of
his annual incentive bonus payable under the PfR Plan. The fiscal 2013 bonus amount for
Mr. Weisler represents the second installment of a signing bonus of $1,552,869 paid under the
terms of his employment offer letter, a retention bonus of $85,557 and a guaranteed portion of
$664,172 of his annual incentive bonus payable under the PfR Plan.
(3)
The grant date fair value of all stock awards has been calculated in accordance with applicable
accounting standards. In the case of RSUs and SRRSUs, the value is determined by
multiplying the number of units granted by the closing price of our stock on the grant date. In
the case of PRUs and SIPRUs, the accounting standards provide for the value to be
determined using only those tranches where the applicable financial performance targets have
been set as of the reporting date.
(4)
The grant date fair value of option awards with time-based vesting is calculated by multiplying
the Black-Scholes-Merton value determined as of the date of grant by the number of options
79
awarded. The grant date fair value of PCSO awards is calculated using a combination of a
Monte Carlo simulation model and a lattice model as these awards contain market conditions.
For information on the assumptions used to calculate the fair value of the awards, refer to
Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the
fiscal year ended October 31, 2013, as filed with the SEC on December 30, 2013.
(5)
Amounts shown represent payouts under the PfR Plan (amounts earned during the applicable
fiscal year but paid after the end of that fiscal year).
(6)
Based on the previously established fiscal 2013 financial metrics and MBOs under the PfR
Plan, the independent directors of the Board determined that Ms. Whitman’s bonus for fiscal
2013 was approximately $3,970,000, or 132.3% of target, reflecting outstanding performance for
the year. This reflected the Board’s approval of Ms. Whitman’s performance on behalf of HP,
and the members’ assessment that her performance in fiscal year 2013 was above target. In
2013, the HRC established a target compensation level for Ms. Whitman of $16.4 million
aligned with the market median. This amount included a long-term incentive (‘‘LTI’’) award of
$13.4 million and target cash incentive of $3 million. Due to timing delays with the grant that
were necessary to accommodate stock plan share limits and the associated stock price changes
of those delays, and higher-than-planned financial valuations of the grant, the aggregate grant
date fair value of the LTI award was $17.11 million or $3.71 million higher than the established
target LTI. Accordingly, the independent directors determined it was in the best interest of HP
and its stockholders to offset this higher LTI valuation through the cash bonus of $3,970,000
otherwise payable to Ms. Whitman under the PfR Plan, resulting in Ms. Whitman receiving
$3,710,000 of her $3,970,000 bonus through LTI value, and $260,000 in cash payment. This is
reflected in the amount above.
(7)
Amounts shown represent the increase in the actuarial present value of NEO pension benefits
during the applicable fiscal year. There is no amount shown for NEOs where there has been a
decrease in the actuarial present value of pension benefits, which has occurred for Ms. Lesjak
and Mr. Nefkens due to an increase in the discount rates used to determine these present
values as of October 31, 2013 compared to those used as of October 31, 2012. As described in
more detail under ‘‘Narrative to the Fiscal 2013 Pension Benefits Table’’ below, pension
accruals have ceased for all NEOs, and NEOs hired after the dates that pension accruals
ceased are not eligible to participate in any such pension plan. Accordingly, the amounts
reported for the NEOs do not reflect additional accruals but reflect the passage of one more
year from the prior present value calculation, which includes interest growth on cash balance
accounts as defined under the terms of the HP Pension Plan as well as changes in other
actuarial assumptions. The assumptions used in calculating the changes in pension benefits are
described in footnote (2) to the Fiscal 2013 Pension Benefits Table below. No HP plan provides
for above-market earnings on deferred compensation amounts, so the amounts reported in this
column do not reflect any such earnings.
(8)
The amounts shown are detailed in the supplemental All Other Compensation Table below.
(9)
Effective June 18, 2013, Mr. Bradley ceased serving as Executive Vice President, Printing and
Personal Systems when he accepted the non-Executive Council position of Executive Vice
President, Strategic Growth Initiatives and thus ceased to be a Section 16 officer.
80
Fiscal 2013 All Other Compensation Table
The following table provides additional information about the amounts that appear in the ‘‘All
Other Compensation’’ column in the Summary Compensation Table above:
401(k)
NQDC
Security
Personal
Tax
Company Company Mobility
Services/ Legal Severance Aircraft GrossMatch(1) Match(2) Program(3) Systems(4) Fees Payments Usage(5) Up(6) Miscellaneous(7)
($)
($)
($)
($)
($)
($)
($)
($)
($)
Name
Margaret C. Whitman
Catherine A. Lesjak .
William L. Veghte . . .
Dion J. Weisler . . . .
Michael G. Nefkens .
R. Todd Bradley . . . .
.
.
.
.
.
.
—
10,193
7,650
—
7,650
10,200
—
10,000
—
—
—
10,000
—
—
—
387,560
1,907,807
—
1,769
2,407
—
8,699
—
9,624
—
—
—
—
—
—
—
—
—
—
—
—
254,162
—
2,034
3,464
2,565
11,754
—
—
—
628,485
745,108
—
19,403
18,000
12,785
61,785
—
24,703
Total
AOC
($)
275,334
40,600
22,469
1,089,993
2,663,130
66,281
(1)
Represents matching contributions made under the HP 401(k) Plan.
(2)
Represents matching contributions credited during fiscal 2013 under the HP Executive
Deferred Compensation Plan with respect to the 2012 calendar year of that plan.
(3)
For Mr. Weisler, represents benefits provided under our executive mobility program.
Mr. Weisler’s home location is Singapore, but since July 2013, Mr. Weisler has been on
assignment in Palo Alto, California. For Mr. Nefkens, represents a relocation bonus of
$1,500,000, which was paid under the terms of his employment offer letter, and benefits
provided under our executive mobility program of $407,807. Mr. Nefkens was on an assignment
in the United Kingdom during fiscal 2013 and relocated to Palo Alto, California in June 2013.
(4)
Represents home security services provided to the NEOs. Although security systems were
installed at our request, consistent with SEC guidance, the expense is reported here as a
perquisite due to the fact that there is an incidental personal benefit.
(5)
Represents the value of personal usage of HP corporate aircraft. For purposes of reporting the
value of such personal usage in this table, we use data provided by an outside firm to calculate
the hourly cost of operating each type of aircraft. These costs include the cost of fuel,
maintenance, landing and parking fees, crew, catering and supplies. For trips by NEOs that
involve mixed personal and business usage, we include the incremental cost of such personal
usage (i.e., the excess of the cost of the actual trip over the cost of a hypothetical trip without
the personal usage). For income tax purposes, the amounts included in NEO income are
calculated based on the standard industry fare level valuation method. No tax gross-ups are
provided for this imputed income.
(6)
Represents reimbursement for taxes incurred as a result of benefits provided under our
executive mobility program.
(7)
Generally includes imputed income with respect to attendance at HP events by the NEO’s
spouse or other guest, and amounts paid either directly to the executives or on their behalf for
financial counseling, as follows: Ms. Whitman: $18,000; Ms. Lesjak: $18,000; Mr. Veghte:
$11,441; Mr. Weisler: $14,250; and Mr. Bradley: $18,000.
Narrative to the Summary Compensation Table
The amounts reported in the Summary Compensation Table, including base pay, annual and
LTI award amounts, benefits and perquisites, are described more fully under ‘‘Compensation Discussion
and Analysis.’’
81
The amounts reported in ‘‘Non-Equity Incentive Plan Compensation’’ column include amounts
earned in fiscal 2013 by each of the NEOs under the PfR Plan. The narrative description of the
remaining information in the Summary Compensation Table is provided in the narrative to the other
compensation tables.
Grants of Plan-Based Awards in Fiscal 2013
The following table provides information on awards granted under the PfR Plan for fiscal 2013
and awards of RSUs, PCSOs and non-qualified stock options (‘‘NQs’’) granted as part of fiscal 2013
long-term incentive compensation:
Grant
Date
Name
Margaret
PfR . . .
PCSO . .
RSU . . .
PCSO . .
RSU . . .
C. Whitman
. . . . . . . .
. . . . . . . .
. . . . . . . .
. . . . . . . .
. . . . . . . .
Catherine
PfR . . .
RSU . . .
PCSO . .
A.
. .
. .
. .
William
PfR . .
RSU . .
PCSO .
RSU . .
PCSO .
3,000,000 10,500,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,500,000
—
1,212,943
—
—
—
—
—
—
—
—
287,057
—
3,616
—
13.83
—
15.02
—
—
6,609,357
4,311,596
6,104,076
82,879
Lesjak
. . . . . . . . . . . . . 11/1/2012
. . . . . . . . . . . . . 12/6/2012
. . . . . . . . . . . . . 12/6/2012
10,438
—
—
1,043,750
—
—
3,653,125
—
—
—
—
—
—
—
1,012,293
—
—
—
—
108,460
—
—
—
13.83
—
1,500,002
4,460,404
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Grant Date
Fair Value
of Stock
and
Option
Awards(4)
($)
30,000
—
—
—
—
Dion J. Weisler
PfR . . . . . . .
RSU . . . . . . .
NQ . . . . . . .
RSU . . . . . . .
PCSO . . . . . .
.
.
.
.
.
All Other
Option
Awards:
Exercise
or Base
Price of
Option
Awards
($)
. 11/1/2012
. 12/6/2012
. 1/2/2013
. 1/2/2013
. 3/20/2013
L. Veghte
. . . . . .
. . . . . .
. . . . . .
. . . . . .
. . . . . .
.
.
.
.
.
All Other
Stock
Awards:
Estimated Future Payouts
Estimated Future Payouts
Number
Under Non-Equity
Under Equity
of Shares
Incentive Plan Awards(1)
Incentive Plan Awards(2)
of Stock
Threshold
Target
Maximum Threshold
Target
Maximum or Units(3)
($)
($)
($)
(#)
(#)
(#)
(#)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
11/1/2012
12/6/2012
12/6/2012
9/18/2013
9/18/2013
10,625
—
—
—
—
1,062,500
—
—
—
—
3,718,750
—
—
—
—
—
—
—
—
—
—
—
1,113,522
—
769,936
—
—
—
—
—
—
119,306
—
82,494
—
—
—
13.83
—
21.82
—
1,650,002
4,906,443
1,800,019
5,020,367
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. 11/1/2012
. 12/6/2012
. 12/6/2012
. 8/1/2013
. 8/1/2013
4,348
—
—
—
—
434,803
—
—
—
—
1,521,811
—
—
—
—
—
—
—
—
—
—
—
120,000
—
373,618
—
—
—
—
—
—
40,000
—
40,031
—
—
—
13.83
—
26.23
—
553,200
413,672
1,050,013
3,060,050
Michael
PfR . .
RSU . .
PCSO .
G.
. .
. .
. .
Nefkens
. . . . . . . . . . . . . . 11/1/2012
. . . . . . . . . . . . . . 1/16/2013
. . . . . . . . . . . . . . 1/16/2013
7,500
—
—
750,000
—
—
2,625,000
—
—
—
—
—
—
—
569,437
—
—
—
—
61,012
—
—
—
17.21
—
1,050,017
3,332,493
R. Todd
PfR . .
RSU . .
PCSO .
Bradley
. . . . . . . . . . . . . . . . 11/1/2012
. . . . . . . . . . . . . . . . 12/6/2012
. . . . . . . . . . . . . . . . 12/6/2012
11,688
—
—
1,168,750
—
—
4,090,625
—
—
—
—
—
—
—
1,265,366
—
—
—
—
135,575
—
—
—
13.83
—
1,875,002
5,575,504
(1)
Amounts represent the range of possible cash payouts for fiscal 2013 awards under the PfR
Plan.
(2)
Except as otherwise noted, PCSO awards vest as follows: For the first half of the award to vest,
our stock price must increase by at least 20% over the grant date stock price for at least
20 consecutive trading days within four years from the date of grant and the recipient’s service
to HP must continue for two years from the date of grant, or, if longer, until the date the stock
price is met. For the remainder of the award to vest, our stock price must increase by at least
40% over the grant date stock price for at least 20 consecutive trading days within four years
from the date of grant and the recipient’s service to HP must continue for three years from the
date of grant, or longer, until the date the stock price is met. The PCSO award for Mr. Veghte
82
vests as follows: For the first third of the award to vest, our stock price must increase by at
least 20% over the grant date stock price for at least 20 consecutive trading days within four
years from the date of grant and Mr. Veghte’s service to HP must continue for one year from
the date of grant, or longer, until the date the stock price is met. For the second third of the
award to vest, our stock price must increase by at least 20% over the grant date stock price for
at least 20 consecutive trading days within four years from the date of grant and Mr. Veghte’s
service to HP must continue for at least two years from the date of grant. For the remainder of
the award to vest, our stock price must increase by at least 40% over the grant date stock price
for at least 20 consecutive trading days within four years from the date of grant and
Mr. Veghte’s service to HP must continue for three years from the date of grant or, if longer,
until the date the stock price is met. All PCSO awards have an eight-year term. Mr. Weisler’s
NQ option award vests one third each on the first, second, and third anniversaries of the grant
date subject to his continued service to HP.
(3)
RSUs vest as to one-third of the units on each of the first three anniversaries of the grant date,
subject to continued service with HP.
(4)
See footnote (3) to the Summary Compensation Table for a description of the method used to
determine the grant date fair value of stock awards.
83
Outstanding Equity Awards at 2013 Fiscal Year-End
The following table provides information on stock and option awards held by the NEOs as of
October 31, 2013:
Option Awards
Number of
Number of
Securities
Securities
Underlying
Underlying
Unexercised Unexercised
Options
Options
(#)
(#)
Exercisable Unexercisable(1)
Name
Stock Awards
Equity
Incentive
Plan Awards:
Number of
Number of
Securities
Shares or
Underlying
Units of
Unexercised Option
Stock That
Unearned Exercise
Option
Have Not
Options(2) Price(3) Expiration Vested(5)
(4)
(#)
($)
Date
(#)
Equity
Incentive
Equity
Plan Awards:
Incentive
Market or
Plan Awards: Payout Value
Market
Number of of Unearned
Value of
Unearned
Shares,
Shares or Shares, Units
Units
Units of
or Other
or Other
Stock That Rights That Rights That
Have Not
Have Not
Have Not
Vested(6)
Vested(7)
Vested(6)
($)
(#)
($)
Margaret C. Whitman
200,000
—
—
—
100,000
—
—
—
1,600,000
636,847
1,500,000
1,212,943
23.59 9/27/2019
26.38 12/14/2019
13.83 12/6/2020
15.02
1/2/2021
407,754
—
—
—
9,936,965
—
—
—
172,622
—
—
—
4,206,798
—
—
—
Catherine A. Lesjak .
35,000
100,000
—
—
—
—
—
—
—
—
219,459
1,012,293
31.50 1/23/2014
42.27 1/18/2015
27.34 12/12/2019
13.83 12/6/2020
240,610
—
—
—
5,863,666
—
—
—
59,486
—
—
—
1,449,674
—
—
—
William L. Veghte . . .
30,000
—
—
—
10,000
—
—
—
—
219,459
1,113,522
769,936
47.00 5/19/2018
27.34 12/12/2019
13.83 12/6/2020
21.82 9/18/2021
243,558
—
—
—
5,935,508
—
—
—
59,486
—
—
—
1,449,674
—
—
—
Dion J. Weisler . . . .
12,500
—
—
37,500
—
—
—
120,000
373,618
27.15
13.83
26.23
1/19/2020
12/6/2020
8/1/2021
116,328
—
—
2,834,913
—
—
—
—
—
—
—
—
Michael G. Nefkens . .
28,000
7,000
—
14,000
14,000
—
—
—
569,437
23.59
28.41
17.21
9/27/2019
12/7/2019
1/16/2021
88,997
—
—
2,168,857
—
—
5,693
—
—
138,738
—
—
R. Todd Bradley . . . .
200,000
—
—
—
—
—
—
263,351
1,265,366
42.27 1/18/2015
27.34 12/12/2019
13.83 12/6/2020
306,395
—
—
7,466,846
—
—
71,384
—
—
1,739,628
—
—
(1)
The option held by Ms. Whitman vests as to 100,000 of the shares on each of the first, second
and third anniversaries of September 27, 2011, the date of grant.
(2)
Option awards in this column vest as to one-half of the shares on each of the second and third
anniversaries of December 12, 2011 and December 6, 2012, the dates of grant, or upon later
satisfaction of certain stock price performance conditions, and subject to continued service in
each case except for the following:
• The 1,600,000 share option held by Ms. Whitman vests as to one-half of the shares on each
of the first and second anniversaries of September 27, 2011, the date of grant, subject to
satisfaction of certain stock price performance conditions and continued service until the
stock price conditions are met;
• The 636,847 share option held by Ms. Whitman vests as to one-half of the shares on each of
the second and third anniversaries of December 14, 2011, the date of grant, subject to the
satisfaction of certain stock price performance conditions, and continued service until the
stock price conditions are met;
84
• The 769,936 share option held by Mr. Veghte vests as to one-third of the shares on each of
the first, second and third anniversaries of September 18, 2013, the date of grant, subject to
the satisfaction of certain stock price performance conditions, and continued service until the
stock price conditions are met;
• The 373,618 share option held by Mr. Weisler vests as to one-half of the shares on each of
the second and third anniversaries of August 1, 2013, the date of grant, subject to the
satisfaction of certain stock price performance conditions, and continued service until the
stock price conditions are met;
• The 120,000 share option held by Mr. Weisler vests as to one-third of the shares on each of
the first, second, and third anniversaries of December 6, 2012; and
• The 569,437 share option held by Mr. Nefkens vests as to one-half of the shares on each of
the second and third anniversaries of January 16, 2013, the date of grant, subject to the
satisfaction of certain stock price performance conditions, and continued service until the
stock price conditions are met.
(3)
Option exercise prices are the fair market value of our stock on the grant date.
(4)
All options have an eight-year term.
(5)
The amounts in this column include shares underlying dividend equivalent units granted with
respect to outstanding stock awards through October 31, 2013. The release dates and release
amounts for all unvested stock awards are as follows, assuming continued employment and
satisfaction of any applicable financial performance conditions:
• Ms. Whitman: December 6, 2013 (95,685 shares plus accrued dividend equivalent shares);
December 14, 2013 (53,071 shares plus accrued dividend equivalent shares); March 20, 2014
(1,205 shares plus accrued dividend equivalent shares); December 6, 2014 (95,686 shares plus
accrued dividend equivalent shares); December 14, 2014 (53,071 shares plus accrued dividend
equivalent shares); March 20, 2015 (1,205 shares plus accrued dividend equivalent shares);
December 6, 2015 (95,686 shares plus accrued dividend equivalent shares); and March 20,
2016 (1,206 shares plus accrued dividend equivalent shares);
• Ms. Lesjak: December 6, 2013 (36,153 shares plus accrued dividend equivalent shares);
December 12, 2013 (18,288 shares plus accrued dividend equivalent shares); December 6,
2014 (36,153 shares plus accrued dividend equivalent shares); December 12, 2014 (18,289
shares plus accrued dividend equivalent shares); June 27, 2015 (85,764 shares plus accrued
dividend equivalent shares); and December 6, 2015 (36,154 shares plus accrued dividend
equivalent shares);
• Mr. Veghte: December 6, 2013 (39,768 shares plus accrued dividend equivalent shares);
December 12, 2013 (18,288 shares plus accrued dividend equivalent shares); September 18,
2014 (27,498 shares plus accrued dividend equivalent shares); December 6, 2014 (39,769
shares plus accrued dividend equivalent shares); December 12, 2014 (18,289 shares plus
accrued dividend equivalent shares); September 18, 2015 (27,498 shares plus accrued
dividend equivalent shares); December 6, 2015 (39,769 shares plus accrued dividend
equivalent shares); and September 18, 2016 (27,498 shares plus accrued dividend equivalent
shares);
85
• Mr. Weisler: December 6, 2013 (13,333 shares plus accrued dividend equivalent shares);
January 18, 2014 (16,667 shares plus accrued dividend equivalent shares); August 1, 2014
(13,343 shares plus accrued dividend equivalent shares); December 6, 2014 (13,333 shares
plus accrued dividend equivalent shares); January 18, 2015 (16,667 shares plus accrued
dividend equivalent shares); August 1, 2015 (13,344 shares plus accrued dividend equivalent
shares); December 6, 2015 (13,334 shares plus accrued dividend equivalent shares); and
August 1, 2016 (13,344 shares plus accrued dividend equivalent shares);
• Mr. Nefkens: December 7, 2013 (4,667 shares plus accrued dividend equivalent shares);
December 10, 2013 (2,667 shares plus accrued dividend equivalent shares); January 16, 2014
(20,337 shares plus accrued dividend equivalent shares); September 19, 2014 (13,813 shares
plus accrued dividend equivalent shares); December 7, 2014 (4,667 shares plus accrued
dividend equivalent shares); January 16, 2015 (20,337 shares plus accrued dividend equivalent
shares); and January 16, 2016 (20,338 shares plus accrued dividend equivalent shares); and
• Mr. Bradley: December 6, 2013 (45,191 shares plus accrued dividend equivalent shares);
December 12, 2013 (21,946 shares plus accrued dividend equivalent shares); December 6,
2014 (45,192 shares plus accrued dividend equivalent shares); December 12, 2014 (21,946
shares plus accrued dividend equivalent shares); December 6, 2015 (45,192 shares plus
accrued dividend equivalent shares); and June 27, 2015 (114,352 shares plus accrued dividend
equivalent shares).
(6)
Value calculated based on the $24.37 closing price of our stock on October 31, 2013.
(7)
The amounts in this column include the amounts of PRUs granted in fiscal 2012 adjusted for
actual achievement during fiscal 2012 and 2013 on the annual metric of cash flow from
operations as a percentage of revenue. For fiscal 2012, performance on the annual cash flow
metric was 17.0% of target and performance on the annual revenue growth metric was 56.8%
of target. For fiscal 2013, performance on the annual cash flow metric was 164.3% of target
and performance on the annual revenue growth metric was 0.0% of target. For these PRUs,
the 17.0% cash flow multiplier and the 56.8% revenue growth multiplier apply to the first
one-third of the fiscal 2012 grant, and the 164.3% cash flow multiplier and the 0.0% revenue
growth multiplier apply to the second one-third of the fiscal 2012 grant, weighted at 70% cash
flow and 30% revenue growth. The remaining one third of these PRUs are reported at target
and will be adjusted based on actual performance during fiscal 2014.
86
Option Exercises and Stock Vested in Fiscal 2013
The following table provides information about options exercised and stock awards vested for
the NEOs during the fiscal year ended October 31, 2013:
Option Awards
Number of
Shares Acquired Value Realized
on Exercise
on Exercise
(#)
($)
Name
Margaret C. Whitman
Catherine A. Lesjak . .
William L. Veghte . . .
Dion J. Weisler . . . . .
Michael G. Nefkens . .
R. Todd Bradley . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
—
—
—
—
—
—
—
—
—
—
—
Stock Awards(1)
Number of
Shares Acquired Value Realized
on Vesting
on Vesting(2)
(#)
($)
54,399
43,451
50,505
17,155
31,926
40,872
802,385
622,203
902,145
293,522
609,531
587,071
(1)
Does not include the PRU awards granted for the three-year period that ended on October 31,
2013 because none of those awards vested.
(2)
Represents the amounts realized based on the fair market value of our stock on the vesting
date for restricted stock or RSUs. Fair market value is determined based on the closing price
of our stock on the applicable date.
87
Fiscal 2013 Pension Benefits Table
The following table provides information about the present value of accumulated pension
benefits payable to each NEO:
Plan Name(1)
Name
Margaret C. Whitman(3) . . . . . . . . . . . .
—
—
Catherine A. Lesjak . . . . . . . . . . . . . . .
RP
EBP
William L. Veghte(3) . . . . . . . . . . . . . . .
Number of
Years of
Credited
Service
(#)
Present Value of
Accumulated
Benefit(2)
($)
Payments During
Last Fiscal Year
($)
—
—
—
—
—
—
21.3
21.3
271,616
1,929,260
—
—
—
—
—
—
—
—
—
—
Dion J. Weisler(3) . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
Michael G. Nefkens . . . . . . . . . . . . . . .
EDS RP
Restoration Plan
7.5
7.5
217,052
248,337
—
—
R. Todd Bradley . . . . . . . . . . . . . . . . . .
CAPP
CARP
0.6
0.6
12,270
8,432
—
—
(1)
The ‘‘CAPP’’ and the ‘‘CARP’’ are the qualified HP Cash Account Pension Plan and the
nonqualified HP Cash Account Restoration Plan, respectively. The ‘‘RP’’ and the ‘‘EBP’’ are
the qualified HP Retirement Plan and the nonqualified HP Excess Benefit Plan, respectively.
The ‘‘EDS RP’’ and ‘‘Restoration Plan’’ are the qualified EDS Retirement Plan and the
nonqualified EDS Restoration Plan, respectively. All benefits are frozen under these plans. The
CAPP, the RP and the EDS RP have been merged into the HP Pension Plan, although benefits
continue to be determined under the separate formulas.
(2)
The present value of accumulated benefits is shown at the age 65 unreduced retirement age for
the RP and the EBP using the assumptions under Accounting Standards Codification (ASC)
Topic 715-30 Defined Benefit Plans—Pension for the 2013 fiscal year end measurement (as of
October 31, 2013). The present value is based on a discount rate of 4.95% for the RP, EDS RP
and Restoration Plan, and 3.89% for the EBP, lump sum interest rates of 1.40% for the first
five years, 4.66% for the next 15 years and 5.62% thereafter, and applicable mortality. As of
October 31, 2012 (the prior measurement date), the ASC Topic 715-30 assumptions included a
discount rate of 4.14% for the RP and EDS RP, 4.18% for the Restoration Plan and 3.28% for
the EBP, lump sum interest rates of 1.02% for the first five years, 3.71% for the next 15 years
and 4.67% thereafter, and applicable mortality. Since there are no early retirement reductions
in the CAPP or the CARP and the account balances are vested, the CAPP and the CARP
account balances are used as the present value of the accumulated benefit. Likewise, there are
no early retirement reductions in the EDS RP or the Restoration Plan and since the earliest
retirement age would be age 55 for Mr. Nefkens assuming he continued employment to that
date, the present value of accumulated benefits is shown at an age 55 retirement age.
(3)
Ms. Whitman, Mr. Veghte and Mr. Weisler are not eligible to receive benefits under any
defined benefit pension plan because we ceased benefit accruals under all of our U.S.-defined
benefit pension plans prior to the commencement of their employment with HP.
88
Narrative to the Fiscal 2013 Pension Benefits Table
No NEO currently accrues a benefit under any qualified or non-qualified defined benefit
pension plan because we ceased benefit accruals in all of our U.S.-qualified defined benefit pension
plans (and their non-qualified plan counterparts) in prior years. Benefits previously accrued by the
NEOs under HP pension plans are payable to them following termination of employment, subject to
the terms of the applicable plan.
Terms of the HP Retirement Plan
Ms. Lesjak earned benefits under the RP and the EBP based on her pay and service prior to
2008. The RP is a traditional defined benefit plan that provided a benefit based on years of service and
the participant’s ‘‘highest average pay rate,’’ reduced by a portion of Social Security earnings. ‘‘Highest
average pay rate’’ was determined based on the 20 consecutive fiscal quarters when pay was the
highest. Pay for this purpose included base pay and bonus, subject to applicable IRS limits. Benefits
under the RP may be taken in one of several different annuity forms or in an actuarially equivalent
lump sum. Benefits calculated under the RP are offset by the value of benefits earned under the HP
Deferred Profit Sharing Plan (the ‘‘DPSP’’) before November 1, 1993. Together, the RP and the DPSP
constitute a ‘‘floor-offset’’ arrangement for periods before November 1, 1993.
Benefits not payable from the RP and the DPSP due to IRS limits are paid from the
nonqualified EBP under which benefits are unfunded and unsecured. When an EBP participant
terminates employment, the benefit liability is transferred to the EDCP, where an account is established
for the participant. That account is then credited with hypothetical investment earnings (gains or losses)
based upon the investment election made by participants from among investment options similar to
those offered under the HP 401(k) Plan. There is no formula that would result in above-market
earnings or payment of a preferential interest rate on this benefit.
At the time of distribution, amounts representing EBP benefits are paid from the EDCP in a
lump sum or installment form, according to pre-existing elections made by those participants, except
that participants with a small benefit or who have not qualified for retirement status (age 55 with at
least 15 years of service) are paid their EBP benefit in January of the year following their termination,
subject to any delay required by Section 409A of the Code.
Terms of the HP Cash Account Pension Plan
Prior to 2006, Mr. Bradley earned benefits under the CAPP, which is a cash balance plan that
provides pension benefits determined by reference to a hypothetical account balance.
Prior to this plan being frozen, participants received ‘‘pay credits’’ equal to 4% of base pay
credited quarterly to their accounts and ‘‘interest credits’’ credited daily. Currently, participants who
have not taken a distribution receive interest credits at the rate equal to the one-year rate for Treasury
securities plus 1%; the ‘‘interest credit’’ rate is adjusted annually. Benefits under the CAPP may be
taken in one of several different annuity forms or in a lump sum equal to the hypothetical account
balance.
Prior to 2006, Mr. Bradley also received pay and interest credits to a hypothetical account
balance established for CARP participants on base pay in excess of certain IRS limits at the same rates
as had been credited under the CAPP. Benefits under the CARP are unfunded and unsecured. Upon
termination of employment, a CARP participant is paid his or her account balance in the form of a
lump sum in January of the year following termination, subject to any delay required by Section 409A
of the Code.
89
Terms of the EDS Retirement Plan
Prior to joining us from EDS in 2009, Mr. Nefkens earned benefits under the EDS RP, which
is a cash balance plan that provides pension benefits determined by reference to a hypothetical account
balance.
Prior to this plan being frozen, participants received ‘‘pay credits’’ which varied with age and
years of service (points) and differed for pay above and below the taxable wage base. Currently,
participants who have not taken a distribution receive interest credits at the rate equal to the 30 year
Treasury bond yield plus 0.5% but not less than 5%; the ‘‘interest credit’’ rate is adjusted annually.
Benefits are available in several different annuity forms which are calculated at retirement age (age 65
or age 55 or older with combined age and service equal to 70 or more) by dividing the hypothetical
account balance by 120 to determine a monthly benefit. This resulting monthly benefit is payable over
the participant’s lifetime with annual cost-of-living increases beginning at age 62 which are based on the
annual CPI but not higher than 3% or the monthly benefit can be converted to actuarially equivalent
optional forms of annuity payment. These optional forms can include cost-of-living increases or higher
level amounts; the hypothetical account balance is not available as a lump sum except for small
amounts or to the beneficiary of the participant upon his or her death before commencement.
Prior to joining us from EDS in 2009, Mr. Nefkens also received pay and interest credits to a
hypothetical account balance under the Restoration Plan established for EDS RP participants on pay in
excess of certain IRS limits at the same rates as had been credited under the EDS RP. Benefits under
the Restoration Plan are unfunded and unsecured. Upon retirement eligibility, a Restoration Plan
participant commences his or her benefit, subject to any delay required by Section 409A of the Code.
We do not sponsor any other supplemental pension plans or special retiree medical benefit
plans for executive officers.
Fiscal 2013 Nonqualified Deferred Compensation Table
The following table provides information about contributions, earnings, withdrawals,
distributions and balances under the EDCP:
Name
Margaret C. Whitman
Catherine A. Lesjak . .
William L. Veghte(4) . .
Dion J. Weisler(5) . . . .
Michael G. Nefkens . .
R. Todd Bradley . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Executive
Contributions
in Last FY(1)
($)
Registrant
Contributions
in Last FY(2)
($)
Aggregate
Earnings
in Last FY
($)
Aggregate
Withdrawals/
Distributions(3)
($)
Aggregate
Balance at FYE
($)
—
1,680
20,000
—
—
22,000
—
10,000
—
—
—
10,000
—
1,411,600
1,063
—
—
66,364
—
(254,197)
—
—
—
—
—
5,778,161
21,063
—
—
550,483
(1)
The amounts reported here as ‘‘Executive Contributions’’ and ‘‘Registrant Contributions’’ are
reported as compensation to such NEO in the Summary Compensation Table above.
(2)
The contributions reported here as ‘‘Registrant Contributions’’ were made in fiscal 2013 with
respect to calendar year 2012 participant base-pay deferrals. During fiscal 2013, the NEOs were
eligible to receive a 4% matching contribution on base-pay deferrals that exceeded the IRS
limit that applies to the qualified HP 401(k) Plan up to a maximum of two times that limit.
90
(3)
The distributions reported here were made pursuant to participant elections made prior to the
time that the amounts were deferred in accordance with plan rules.
(4)
Mr. Veghte did not contribute base pay in calendar year 2012 and, thus, did not receive any
matching contributions in fiscal 2013.
(5)
Mr. Weisler is paid through our payroll in Singapore and, thus, not eligible to participate in the
EDCP.
Narrative to the Fiscal 2013 Nonqualified Deferred Compensation Table
HP sponsors the EDCP, a nonqualified deferred compensation plan that permits eligible U.S.
employees to defer base pay in excess of the amount taken into account under the qualified HP 401(k)
Plan and bonus amounts of up to 95% of the annual incentive bonus payable under the PfR Plan. In
addition, a matching contribution is available under the plan to eligible employees. The matching
contribution applies to base-pay deferrals on compensation above the IRS limit that applies to the
qualified HP 401(k) Plan up to a maximum of two times that compensation limit (for fiscal 2013
matching contributions, on calendar year 2012 base pay from $250,000 to $500,000). During fiscal 2013,
the NEOs were eligible for a matching contribution of up to 4%.
Upon becoming eligible for participation, employees must specify the amount of base pay
and/or the percentage of bonus to be deferred, as well as the time and form of payment. If termination
of employment occurs before retirement (defined as at least age 55 with 15 years of service),
distribution is made in the form of a lump sum in January of the year following the year of
termination, subject to any delay required under Section 409A of the Code. At retirement (or earlier, if
properly elected), benefits are paid according to the distribution election made by the participant at the
time of the deferral election subject to any delay required under Section 409A of the Code. No
withdrawals are permitted prior to the previously elected distribution date, other than ‘‘hardship’’
withdrawals as permitted by applicable law.
Amounts deferred or credited under the EDCP are credited with hypothetical investment
earnings based on participant investment elections made from among the investment options available
under the HP 401(k) Plan. Accounts maintained for participants under the EDCP are not held in trust,
and all such accounts are subject to the claims of general creditors of HP. No amounts are credited
with above-market earnings.
91
Potential Payments Upon Termination or Change in Control
The amounts in the following table assume that the NEOs terminated HP employment
effective October 31, 2013. The closing price of our stock was $24.37 on that date. These amounts are
in addition to benefits generally available to U.S. employees upon termination of employment, such as
distributions from the retirement plans and the HP 401(k) Plan and payment of accrued vacation.
Name
Termination
Scenario
Margaret C. Whitman . . . Voluntary/For Cause
Disability
Retirement
Death
Not for Cause
Change in Control
Catherine A. Lesjak . . . . Voluntary/For Cause
Disability
Retirement
Death
Not for Cause
Change in Control
William L. Veghte . . . . . . Voluntary/For Cause
Disability
Retirement
Death
Not for Cause
Change in Control
Dion J. Weisler . . . . . . . . Voluntary/For Cause
Disability
Retirement
Death
Not for Cause
Change in Control
Michael G. Nefkens . . . . . Voluntary/For Cause
Disability
Retirement
Death
Not for Cause
Change in Control
R. Todd Bradley . . . . . . . Voluntary/For Cause
Disability
Retirement
Death
Not for Cause
Change in Control
(1)
Total(1)
($)
Severance(2)
($)
—
39,381,752
—
33,054,081
7,278,658
43,814,385
—
17,149,599
—
14,003,944
21,383,924
21,383,924
—
20,364,517
—
15,963,929
5,159,506
23,965,904
—
4,027,505
—
1,982,472
3,051,314
6,055,985
—
6,285,898
—
4,802,959
2,757,012
8,383,099
—
21,523,840
—
17,546,973
6,573,010
24,599,950
—
—
—
—
1,460,188
1,460,188
—
—
—
—
3,640,062
3,640,062
—
—
—
—
3,007,124
3,007,124
—
—
—
—
2,028,480
2,028,480
—
—
—
—
2,040,322
2,040,322
—
—
—
—
2,362,995
2,362,995
Long-Term Incentive Programs(3)
Stock
Restricted
PRU
Options
Stock
Program
($)
($)
($)
—
27,229,017
—
27,229,017
12,999
28,477,017
—
10,669,568
—
10,669,568
10,669,568
10,669,568
—
13,699,859
—
13,699,859
—
13,699,859
—
1,264,800
—
1,264,800
386,460
1,264,800
—
4,088,089
—
4,088,089
1,820
4,088,089
—
13,336,958
—
13,336,958
—
13,336,958
—
9,670,382
—
3,342,711
3,323,118
9,670,382
—
5,624,620
—
2,478,965
5,624,620
5,624,620
—
5,809,247
—
1,408,659
1,296,971
5,809,247
—
2,762,705
—
717,672
636,374
2,762,705
—
2,115,950
—
633,011
633,011
2,115,950
—
7,160,369
—
3,183,502
3,183,502
7,160,369
—
2,482,353
—
2,482,353
2,482,353
4,206,798
—
855,411
—
855,411
1,449,674
1,449,674
—
855,411
—
855,411
855,411
1,449,674
—
—
—
—
—
—
—
81,859
—
81,859
81,859
138,738
—
1,026,513
—
1,026,513
1,026,513
1,739,628
Total does not include amounts earned or benefits accumulated due to continued service by the
NEO through October 31, 2013, including vested stock options, accrued retirement benefits,
and vested balances in the EDCP, as those amounts are detailed in the preceding tables. Total
also does not include amounts an NEO was eligible to receive under the annual PfR Plan with
respect to fiscal 2013 performance.
92
(2)
For Ms. Whitman, the amounts reported represent the cash benefits payable under the SPEO
pursuant to Ms. Whitman’s employment offer letter, as discussed under ‘‘Executive
Compensation—Compensation Discussion and Analysis—Analysis of Elements of Fiscal 2013
Executive Compensation—Employment Offer Letter for Margaret C. Whitman as President
and CEO.’’ For Ms. Lesjak, the amounts reported represent the cash benefits payable under
Ms. Lesjak’s December 15, 2010 letter agreement, which expired on December 15, 2013. For
the other NEOs, the amounts reported are the cash benefits payable in the event of a
qualifying termination under the SPEO.
(3)
Covered executives receive pro-rata vesting on unvested equity awards, so long as they have
worked at least 25% of the longer of the applicable vesting or performance period, as discussed
under ‘‘Executive Compensation—Compensation Discussion and Analysis—Severance Plan for
Executive Officers.’’ With respect to the treatment of equity in the event of a change in control
of HP, the information reported assumes that the Board or the HRC Committee would exercise
its discretion to accelerate vesting of equity awards in the case of ‘‘not for cause’’ terminations.
Pro-rata vesting of PRUs based on actual performance applies in the event of a termination
due to retirement, death or disability for all grant recipients. To calculate the value of unvested
PRUs for purposes of this table, actual performance is used for the portions of the awards
where the performance is known, and target performance is used for the portions of the
awards where actual performance has not yet been determined. Where applicable, Ms. Lesjak’s
awards have been valued assuming a qualifying termination under her December 15, 2010
letter agreement, which expired on December 15, 2013.
HP Severance Plan for Executive Officers
An executive will be deemed to have incurred a qualifying termination for purposes of the
SPEO if he or she is involuntarily terminated without cause and executes a full release of claims in a
form satisfactory to HP promptly following termination. For purposes of the SPEO, ‘‘cause’’ means an
executive’s material neglect (other than as a result of illness or disability) of his or her duties or
responsibilities to HP or conduct (including action or failure to act) that is not in the best interest of,
or is injurious to, HP. The material terms of the SPEO are described under ‘‘Executive
Compensation—Compensation Discussion and Analysis—Severance Plan for Executive Officers.’’
Voluntary or ‘‘For Cause’’ Termination
In general, an NEO who remained employed through October 31, 2013 (the last day of the
fiscal year) but voluntarily terminated employment immediately thereafter, or was terminated
immediately thereafter as a ‘‘for cause’’ termination, would be eligible (1) to receive his or her annual
incentive amount earned for fiscal 2013 under the PfR Plan (subject to any discretionary downward
adjustment or elimination by the HRC Committee prior to actual payment), (2) to exercise his or her
vested stock options on or before the last day of employment, (3) to receive a distribution of vested
amounts deferred or credited under the EDCP, and (4) to receive a distribution of his or her vested
benefits under the HP 401(k) and pension plans. An NEO who terminated employment before
October 31, 2013, either voluntarily or in a ‘‘for cause’’ termination, would generally not have been
eligible to receive any amount under the PfR Plan with respect to the fiscal year in which the
termination occurred, except that the HRC Committee has the discretion to make payment of prorated
bonus amounts to individuals on leave of absence or in non-pay status, as well as in connection with
certain voluntary severance incentives, workforce reductions and similar programs.
93
‘‘Not for Cause’’ Termination
A ‘‘not for cause’’ termination would qualify the NEO for the amounts described above under
a ‘‘voluntary’’ termination and benefits under the SPEO if the NEO signs the required release of claims
in favor of HP.
In addition to the cash severance benefits and pro-rata equity awards payable under the SPEO,
the NEO would be eligible to exercise vested stock options up to one year after termination and
receive distributions of vested, accrued benefits from HP deferred compensation and pension plans.
Termination Following a Change in Control
In the event of a change in control of HP, the Board is authorized (but not required) to
accelerate the vesting of stock options and to release restrictions on awards issued under HP stock
plans. In addition, Ms. Lesjak was covered at the end of fiscal 2013 by an agreement which provided
her with certain additional protections in the event of a change in control. That agreement expired on
December 15, 2013. For the purposes of this table, the amounts reported for each NEO in the rows
marked ‘‘Change in Control’’ assume that the Board would exercise its discretion in this manner,
resulting in fully accelerated vesting of stock options and a release of all restrictions on all stock-based
awards. In addition, an executive terminated on October 31, 2013 following a change in control would
be eligible for benefits under the SPEO, as described above.
HP Severance Policy for Senior Executives
Under the HP Severance Policy for Senior Executives adopted by the Board in July 2003 (the
‘‘HP Severance Policy’’), HP will seek stockholder approval for future severance agreements, if any,
with certain senior executives that provide specified benefits in an amount exceeding 2.99 times the
sum of the executive’s current annual base salary plus annual target cash bonus, in each case as in
effect immediately prior to the time of such executive’s termination. Individuals subject to this policy
consist of the Section 16 officers designated by the Board. In implementing this policy, the Board may
elect to seek stockholder approval after the material terms of the relevant severance agreement are
agreed upon.
For purposes of determining the amounts subject to the HP Severance Policy, benefits subject
to the limit generally include cash separation payments that directly relate to extraordinary benefits that
are not available to groups of employees other than the Section 16 officers upon termination of
employment. Benefits that have been earned or accrued, as well as prorated bonuses, accelerated stock
or option vesting and other benefits that are consistent with our practices applicable to employees
other than the Section 16 officers, are not counted against the limit. Specifically, benefits subject to the
HP Severance Policy include: (a) separation payments based on a multiplier of salary plus target bonus,
or cash amounts payable for the uncompleted portion of employment agreements; (b) any gross-up
payments made in connection with severance, retirement or similar payments, including any gross-up
payments with respect to excess parachute payments under Section 280G of the Code; (c) the value of
any service period credited to a Section 16 officer in excess of the period of service actually provided
by such Section 16 officer for purposes of any employee benefit plan; (d) the value of benefits and
perquisites that are inconsistent with our practices applicable to one or more groups of employees in
addition to, or other than, the Section 16 officers (‘‘Company Practices’’); and (e) the value of any
accelerated vesting of any stock options, stock appreciation rights, restricted stock or long-term cash
incentives that is inconsistent with Company Practices. The following benefits are not subject to the HP
Severance Policy, either because they have been previously earned or accrued by the employee or
because they are consistent with Company Practices: (i) compensation and benefits earned, accrued,
deferred or otherwise provided for employment services rendered on or prior to the date of
94
termination of employment pursuant to bonus, retirement, deferred compensation or other benefit
plans (e.g., 401(k) Plan distributions, payments pursuant to retirement plans, distributions under
deferred compensation plans or payments for accrued benefits such as unused vacation days), and any
amounts earned with respect to such compensation and benefits in accordance with the terms of the
applicable plan; (ii) payments of prorated portions of bonuses or prorated long-term incentive
payments that are consistent with Company Practices; (iii) acceleration of the vesting of stock options,
stock appreciation rights, restricted stock, RSUs or long-term cash incentives that is consistent with
Company Practices; (iv) payments or benefits required to be provided by law; and (v) benefits and
perquisites provided in accordance with the terms of any benefit plan, program or arrangement
sponsored by HP or its affiliates that are consistent with Company Practices.
For purposes of the HP Severance Policy, future severance agreements include any severance
agreements or employment agreements containing severance provisions that we may enter into after the
adoption of the HP Severance Policy by the Board, as well as agreements renewing, modifying or
extending such agreements. Future severance agreements do not include retirement plans, deferred
compensation plans, early retirement plans, workforce restructuring plans, retention plans in connection
with extraordinary transactions or similar plans or agreements entered into in connection with any of
the foregoing, provided that such plans or agreements are applicable to one or more groups of
employees in addition to the Section 16 officers.
HP Retirement Arrangements
Upon retirement on or after age 55 with at least 15 years of qualifying service, HP employees
in the United States receive full vesting of options granted under our stock plans with a three-year
post-termination exercise period. Restricted stock and RSUs granted prior to November 1, 2011
continue to vest in accordance with their normal vesting schedule, subject to certain post-employment
restrictions, and all restrictions on restricted stock and RSUs granted on or after November 1, 2011
lapse upon retirement. Awards under the PRU Program, if any, are paid on a prorated basis to
participants at the end of the performance period based on actual results, and bonuses, if any, under
the PfR Plan may be paid in prorated amounts at the discretion of management based on actual
results. In accordance with Section 409A of the Code, certain amounts payable upon retirement of (or
other termination by) the NEOs and other key employees will not be paid out for at least six months
following termination of employment.
We sponsor two retiree medical programs in the United States, one of which provides
subsidized coverage for eligible participants based on years of service. Eligibility for this program
requires that participants have been employed by HP before January 1, 2003 and have met other age
and service requirements. None of our NEOs are eligible or can become eligible for this program.
The other U.S. retiree medical program we sponsor provides eligible retirees with access to
coverage at group rates only, with no direct subsidy provided by HP. As of the end of fiscal 2013,
Catherine A. Lesjak was eligible to retire under this program. All of the other NEOs could be eligible
for this program if they retire from HP on or after age 55 with at least ten years of qualifying service
or 80 age plus service points. In addition, beginning at age 45, eligible U.S. employees may participate
in the HP Retirement Medical Savings Account Plan (the ‘‘RMSA’’), under which participants are
eligible to receive HP matching credits of $1,200 per year, beginning at age 45, up to a lifetime
maximum of $12,000, which can be used to cover the cost of such retiree medical coverage (or other
qualifying medical expenses) if the employee retires from HP on or after age 55 with at least ten years
of qualifying service or 80 age plus service points. Ms. Lesjak is the only NEO eligible for the
HP matching credits under the RMSA.
95
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes our equity compensation plan information as of October 31,
2013.
Plan Category
Equity compensation plans approved by HP
stockholders . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans not approved by
HP stockholders . . . . . . . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common shares to
be issued upon
exercise of
outstanding
options, warrants
and rights(1)
(a)
105,535,089(3)
Weighted-average
exercise price
of outstanding
options, warrants
and rights(2)
(b)
$27.3309
Common shares
available for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
300,983,929(4)
—
—
—
105,535,089
$27.3309
300,983,929
(1)
This column does not reflect awards of options and RSUs assumed in acquisitions where the
plans governing the awards were not available for future awards as of October 31, 2013. As of
October 31, 2013, individual awards of options and RSUs to purchase a total of 11,122,742
shares were outstanding pursuant to awards assumed in connection with acquisitions and
granted under such plans at a weighted-average exercise price of $23.7749.
(2)
This column does not reflect the exercise price of shares underlying the assumed options
referred to in footnote (1) to this table or the purchase price of shares to be purchased
pursuant to the ESPP or the legacy HP Employee Stock Purchase Plan (the ‘‘Legacy ESPP’’).
In addition, the weighted-average exercise price does not take into account the shares issuable
upon vesting of outstanding awards of RSUs and PRUs, which have no exercise price.
(3)
Includes awards of options and RSUs outstanding under the ESPP, the 2004 Plan and the
HP 2000 Stock Plan. Also includes awards of PRUs representing 1,250,776 shares that may be
issued under the 2004 Plan. Each PRU award reflects a target number of shares that may be
issued to the award recipient. We determine the actual number of shares the recipient receives
at the end of a three-year performance period based on results achieved versus company
performance goals and stockholder return relative to the market. The actual number of shares
that a grant recipient receives at the end of the period may range from 0% to 200% of the
target number of shares.
(4)
Includes (i) 209,147,593 shares available for future issuance under the 2004 Plan; (ii) 87,744,345
shares available for future issuance under the ESPP; (iii) 2,725,611 shares available for future
issuances under the Legacy ESPP, a plan under which employee stock purchases are no longer
made; and (iv) 1,366,380 shares are reserved for issuance under our Service Anniversary Stock
Plan, a plan under which awards are no longer granted. Taking into account these adjustments,
296,891,938 shares were available for future grants as of October 31, 2013.
96
PRINCIPAL ACCOUNTING FEES AND SERVICES
The Audit Committee has appointed Ernst & Young LLP (‘‘EY’’) as our independent
registered public accounting firm for the fiscal year ending October 31, 2014. Stockholders are being
asked to ratify the appointment of EY at the annual meeting pursuant to Proposal No. 2.
Representatives of EY are expected to be present at the annual meeting, will have the opportunity to
make a statement if they desire to do so, and are expected to be available to respond to appropriate
questions.
Fees Incurred by HP for Ernst & Young LLP
The following table shows the fees paid or accrued by HP for audit and other services provided
by EY for fiscal 2013 and 2012.
2013
2012
In millions
Audit Fees(1) . . . . . .
Audit-Related Fees(2)
Tax Fees(3) . . . . . . . .
All Other Fees(4) . . .
Total . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$34.9
13.8
5.0
0.8
$54.5
$30.6
14.8
3.2
2.2
$50.8
The Audit Committee has approved all of the fees above.
The Audit Committee has delegated to the chair of the Audit Committee the authority to
pre-approve audit-related and non-audit services not prohibited by law to be performed by our
independent registered public accounting firm and associated fees up to a maximum for any one service
of $250,000, provided that the chair shall report any decisions to pre-approve services and fees to the
full Audit Committee at its next regular meeting.
(1)
Audit fees represent fees for professional services provided in connection with the audit of our
financial statements and review of our quarterly financial statements and audit services
provided in connection with other statutory or regulatory filings.
(2)
Audit-related fees consisted primarily of service organization control examinations and other
attestation services of $11.1 million and $11.2 million for fiscal 2013 and fiscal 2012,
respectively. For fiscal 2013 and fiscal 2012, audit-related fees also included accounting
consultations and employee benefit plan audits of $2.7 million and $3.6 million, respectively.
(3)
For fiscal 2013, tax fees included primarily tax advice and tax planning fees of $3.0 million and
tax compliance fees of $2.0 million. For fiscal 2012, tax fees included primarily tax advice and
tax planning fees of $2.6 million and tax compliance fees of $0.6 million.
(4)
For fiscal 2013, all other fees included primarily advisory service fees. For fiscal 2012, all other
fees included reimbursement of approximately $2.0 million in costs relating to responding to a
request for EY information from, and EY providing testimony before, the U.S. Senate
Permanent Subcommittee on Investigations relating to taxation of earnings generated outside
of the United States as well as fees for advisory services relating to our services business.
97
REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
The Audit Committee represents and assists the Board in fulfilling its responsibilities for
general oversight of the integrity of HP’s financial statements, HP’s compliance with legal and
regulatory requirements, the independent registered public accounting firm’s qualifications and
independence, the performance of HP’s internal audit function and independent registered public
accounting firm, and risk assessment and risk management. The Audit Committee manages HP’s
relationship with its independent registered public accounting firm (which reports directly to the Audit
Committee). The Audit Committee has the authority to obtain advice and assistance from outside legal,
accounting or other advisors as the Audit Committee deems necessary to carry out its duties and
receives appropriate funding, as determined by the Audit Committee, from HP for such advice and
assistance.
HP’s management is primarily responsible for HP’s internal control and financial reporting
process. HP’s independent registered public accounting firm, Ernst & Young LLP, is responsible for
performing an independent audit of HP’s consolidated financial statements and issuing opinions on the
conformity of those audited financial statements with United States generally accepted accounting
principles and the effectiveness of HP’s internal control over financial reporting. The Audit Committee
monitors HP’s financial reporting process and reports to the Board on its findings.
In this context, the Audit Committee hereby reports as follows:
1.
The Audit Committee has reviewed and discussed the audited financial statements with
HP’s management.
2.
The Audit Committee has discussed with the independent registered public accounting
firm the matters required to be discussed under the rules adopted by the Public
Company Accounting Oversight Board (‘‘PCAOB’’).
3.
The Audit Committee has received from the independent registered public accounting
firm the written disclosures and the letter required by the applicable requirements of
the PCAOB regarding the independent registered public accounting firm’s
communications with the audit committee concerning independence and has discussed
with the independent registered public accounting firm its independence.
4.
Based on the review and discussions referred to in paragraphs (1) through (3) above,
the Audit Committee recommended to the Board, and the Board has approved, that
the audited financial statements be included in HP’s Annual Report on Form 10-K for
the fiscal year ended October 31, 2013, for filing with the Securities and Exchange
Commission.
The undersigned members of the Audit Committee have submitted this Report to the Board of
Directors.
AUDIT COMMITTEE
Rajiv L. Gupta, Chair
Shumeet Banerji
Robert R. Bennett
James A. Skinner
98
OTHER MATTERS
We know of no other matters to be submitted to the stockholders at the annual meeting. If any
other matters properly come before the stockholders at the annual meeting, it is the intention of the
persons named on the proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
99
IMPORTANT INFORMATION CONCERNING THE HP ANNUAL MEETING
Check-in begins: 12:30 p.m., local time
Meeting begins: 2:00 p.m., local time
• HP stockholders, including joint holders, as of the close of business on January 21, 2014, the record
date for the annual meeting, are entitled to attend the annual meeting on March 19, 2014.
• All stockholders and their proxies should be prepared to present photo identification for admission
to the meeting.
• If you are a record holder or a participant in the HP 401(k) Plan or the ESPP, your share
ownership will be verified against a list of record holders or plan participants as of the record date
prior to your being admitted to the meeting.
• If you are a beneficial owner of your HP shares (i.e., you hold your shares through a broker, trustee
or nominee), you will be asked to present proof of beneficial ownership of HP shares as of the
record date, such as your most recent brokerage statement prior to January 21, 2014 or other
evidence of ownership.
• Persons acting as proxies must bring a valid proxy from a record holder who owns shares as of the
close of business on January 21, 2014.
• Failure to present identification or otherwise comply with the above procedures will result in
exclusion from the meeting.
• Meeting attendees will not be permitted to bring recording equipment, electronic devices or large
bags, briefcases or packages to the meeting.
• Please allow ample time for check-in.
THANK YOU FOR YOUR INTEREST AND SUPPORT—YOUR VOTE IS IMPORTANT!
Directions to the Santa Clara Convention Center, 5001 Great America Parkway, Santa Clara, California
From San Francisco:
• Take 101 South toward San Jose.
• Exit at Great America Parkway.
• Turn left on Great America Parkway.
• The Convention Center is located at Great America Parkway and Tasman Avenue.
• To access the parking garage, exit Great America Parkway at the Hyatt Regency’s second
driveway at Bunker Hill Road.
From San Jose:
• Take 101 North to the Great America Parkway exit.
• Turn right on Great America Parkway.
• The Convention Center is located at Great America Parkway and Tasman Avenue.
• To access the parking garage, exit Great America Parkway at the Hyatt Regency’s second
driveway at Bunker Hill Road.
From Oakland:
• Take I-880 South toward San Jose for approximately 30 to 40 minutes to Highway 237.
• Take Highway 237 toward Mountain View to the Great America Parkway exit.
• Turn left on Great America Parkway.
• The Convention Center is located at Great America Parkway and Tasman Avenue.
• To access the parking garage, exit Great America Parkway at the Hyatt Regency’s second
driveway at Bunker Hill Road.
Note: Parking in the Convention Center garage is free.
4AA5-0662ENW